Clearly Australian budgets are not lying on the operating table without a pulse, but the patient could be in better shape. We must reduce spending and increase revenue lest future generations pay the price, writes John Daley.

In the lead-up to next week's Commonwealth Budget we've seen more than the usual amount of softening up for tough measures.

With the Commission of Audit report, and talk of a deficit levy, austerity is in the air. It is assumed that the Budget is not well.

Clearly Australian budgets are not lying on the operating table without a pulse. Australian governments have much less debt than many others in the developed world. With public debt at less than 15 per cent of GDP, the Commonwealth's credit rating is safe.

But Australian government budgets have been overweight and unhealthy for several years, even if it hasn't been obvious. The mining boom and the global financial crisis concealed a "structural" deficit. In other words, if there had been no mining boom, and even with no temporary stimulus spending to address the financial crisis, the Commonwealth would have had a budget deficit of 2 to 3 per cent of GDP - more than $30 billion in today's terms - for the last five years in a row.

This underlying deficit has become more obvious as mining prices have fallen and the Global Financial Crisis recedes into the past.

In 2013-14, the Commonwealth's budget deficit will be about $38 billion after excluding the one-off cash injection to the Reserve Bank. This is much too high when the economy is not even close to a recession.

Real GDP growth is 2.8 per cent a year, and unemployment about 6 per cent. These measures could be better, but this may be about as good as it gets for some time. If the Commonwealth government was right to spend substantially to stimulate the economy during the GFC, then in today's better economic times there should be surpluses to pay back the past spending.

So the patient could be in better shape. But doctors disagree about the cause of disease - some blame falling revenues, others runaway spending. In fact, the patient has both conditions.

Commonwealth revenues are well below their long-run trends. Revenue is 23 per cent of GDP. The long-run average since 1982 is above 24 per cent, and was above 25 per cent between 1999 and 2007. Even then, government revenues were well below the OECD average. Contrary to what some think, Australia does not have a "big government".

Nevertheless, rapidly increasing spending has also contributed to high deficits. Commonwealth expenditures aside from grants to the states are almost 21 per cent of GDP, reflecting a steady drift upwards from 19 per cent in 2003. High mineral prices are masking even greater rises in spending as a proportion of GDP. When mining prices fall, spending as a proportion of GDP will rise.

But if there is no emergency, why shouldn't Australia continue to enjoy ample wine and cheese?

The Commonwealth budget needs to both lose weight and exercise more.Although changing our behaviour is never urgent, every year that goes by makes the task harder.

The most compelling reason is that sustained budget deficits require tomorrow's taxpayers to pay for today's spending. If we are investing to make our children richer, perhaps this is fair. But that has not happened over the last 10 years.

Most of the increase in government spending above GDP growth paid for more health and age pensions. These might be worthwhile social outcomes, but they are not investments. Governments also spent more on infrastructure, but this is only worthwhile if it is the right infrastructure at the right time for the right price. As the Productivity Commission has noted, project selection has often been poor.

Balanced budgets - and therefore lower government debt - are also important because they provide flexibility in a crisis. In 2008 and 2009 Australia could afford a vigorous response to the global financial crisis precisely because it had so little government debt.

Many on the left are uneasy at calls to balance budgets. It is true that in the short-run, tightening budgets can increase unemployment. But the alternative is worse. If governments run continued deficits, and see their debt increase, eventually they will be forced to cut much harder. These cuts are likely to fall on the most vulnerable, where governments spend a lot of their money.

How should we cure the Australian budget? Some believe that hard cuts to the public service are needed. But even if the Commonwealth government reduced the public service by 15,000 people, this would save no more than $1.5 billion a year, when Australia has a budget problem of more like $30 billion a year.

Tighter targeting of the age pension - while politically difficult - would help a lot more. Including owner-occupied housing in the pension assets test would strip $7 billion a year from the Commonwealth budget.

Yet it is unlikely that reduced expenditure alone can solve the problem. Revenues will have to rise as well. The most promising avenues are tighter targeting of superannuation tax concessions (plausible changes could yield $9 billion a year), and ending negative gearing (worth $4 billion a year in the short term, reducing to $2 billion a year as losses accumulate).

In short, the Commonwealth budget needs to both lose weight and exercise more. Although changing our behaviour is never urgent, every year that goes by makes the task harder.

The alternative is asking our children to pay for current spending. The elderly are also at risk if a future crisis forces governments to cut basic services to the most vulnerable in the community.

Few will credit the Treasurer, Joe Hockey, for a tough budget on Tuesday. But if he makes real progress in improving the health of the Budget, our children will thank him.

John Daley is chief executive of the Grattan Institute. View his full profile here.

Comments (206)

Comments for this story are closed.

Jay Somasundaram:

08 May 2014 8:41:21am

There is virtually universal agreement that companies that earn profit in Australia should be able to escape paying Australian tax - not move that profit to a foreign country. We need to keep hammering away at this. Demand the government come clean on how much we are losing, and commit to a date by which they will get it fixed.

harvey:

08 May 2014 11:55:51am

This is just a pea and thimble game. Oooh look, we are spending too much. While the revenue from resources is going. Where ?

The real issue is why we are tightening our belts at a time when our coal, gas and iron ore has been getting top $$ for the past 10 years. Per capita we have been the richest country in the entire world.

Where has the money gone ? Since Abbott came into power, his govt has made it clear that they hate renewable energy. They hate native forests. They are waging war against these, even to the extent of Hockey calling windmills ugly. The farmers collecting the rent don't think so.

So what is the real story here. When you look at ICAC in NSW, and the trail of corruption that follows the big bucks in resources, you have to wonder if its just NSW.

ram:

08 May 2014 12:23:29pm

We definitely need a Federal ICAC with powers of prosecution. There is obviously something seriously wrong with federal procurements and hiring. Almost nothing, especially high dollar items, are put out to open tender. Executive hiring is no longer done on a competitive basis and the salary levels are seriously bloated. Benchmarked against private industry the federal government pays several times more than it has to for everything.

a:

Andrwe Thomas:

08 May 2014 1:40:15pm

Hi Harvey,

This is a question that our media seem to have completely missed, and a fair question at that. It is also a question that needs to be asked and anserwed

The question must be asked as to why, immediately following the downturn in the commodity markety, that we have a "budget emergency"? How can this be? Surely 20 years is enough to build a robust economy? At the very best, this is utter incompetnace in the management of the Australian economy for the past 20 years, or worse, something much more sinister. Further, if the best the current government can do is to cut Public Sector jobs and increase income and other forms of tax targeting the general populas, then we a in for a rough ride. Taking this approach will only spook the populas and reduce their spending as well as reduce tax streams (less incomes to tax and less GST). This solution is totally second rate and risks making things worse. The only real solution was to properly tax companies dodging tax that they should pay like the rest of us (take Norway's example).

And before I get any responses from one eyed ALP or LNP supporters, don't bother. Both parties were in power during these times, and both seem to have utterly failed to ensure the countries long term economic welath.

Teresa Henshaw:

08 May 2014 2:55:24pm

I agree wholeheartedly, Andrew. It is about time the Australian public got a full and fair accounting of everything that is spent by the government using our hard earned money.

Whatever party they belong to the politicians always cut the important items we all pay tax for, try to get us slaves to work for many more years than most of us would be capable of after working, at real physical jobs, under real conditions- unlike the pollies who swan around at our expense - always give themselves a rise every year regardless and live off our taxes to pay their phone, travel and other bills to keep them in a lifestyle to which they have become accustomed.

The politicians are paid far too much money and their superannuation is also phenomenal and yet the public are expected to fund the lifestyles of ex-prime ministers until they finally die.We should be getting an annual expenditure statement on how much money we are being fleeced of to keep pollies rich after their early retirement, all paid for by a hard working public who have to work until we drop in our tracks.

It is time for a huge shake-up on how any Australian government spends our money.

harvey:

08 May 2014 6:33:54pm

One of the harder things is to spot corruption. It gets hidden in tendering and tax breaks and such like. The Libs do it because they give business anything they want, the ALP did it because they were too scared. And Swan was a total crock at looking after our interests. But incompetence is not corruption.

If businessmen secretly pay a party for "?ccess" to Ministers over dinner, is this corruption ? If a Minister leaves after his party has lost power, to work for a company in the area that he was Minister of, is that corruption ? If a staffer has business interests in the area of his/her Minister's portfolio, is that corruption ?

It certainly is the slippery slope on the way.

It's been everywhere at the Federal level for a long long time, anyone who wants to look can see the lists of who is best mates with who in the business world. And which businesses they protect. And who has got a cushy job in business after being turfed out.

Pollies know by and large not to cr*p in their own nest because they may need somewhere nice to land after the next election.

This is why we need an ICAC at the Federal level. The first action of guilty pollies is to be furious that their integrity has been questioned. Just look at what is coming out of the NSW ICAC. And then there's Craig Thomson.

Desert Woman:

08 May 2014 9:32:42am

They will never do that Jay because everything is now geared to the dominance of corporations over governments. Look at the clauses in some 'free trade' agreements that the corps can sue the national govt. And after all, won't the corps look after our every selfish whim? Provide every new little gadget to keep us from thinking about our future. I'm afraid it's a calorie restricted diet for all of us, including those who are most in need of a decent feed and a warm bed.

Peter the Lawyer:

Yopu really do sound like someone who is hammering away at a mantra without actually knowing anything about tax legislation.

Can you explain to us how companies move profits offshore when the tax legislation is full of anti-avaoidance measures that prevent this happenning.

What actually happens is that foreign companies can now earn profits off shore through internet sales. There is no shifting of profits, because the source of the income is offshore tofrom the beginning. In other words, if Big Co sells a million widgets to Australians using a server in the Cayman Islands and then ships the product from China to Australia, then the income is generated in the Caymans. I don't see what the Australian government can do about that, other than deem the income to have an Australian source. But who would they tax? BigCo might not even have an Australian company. But even it it did, that subsidiary would not be the same one as the one who sold the widgets over the internet. I suppose the governement could deem all sales made by BigCo's offshore affiliates to Austrlians to be be made by BigCo Australia Pty Ltd, but that would be very difficult to enforce.

Mitor the Bold:

08 May 2014 10:02:10am

Australian transactions need to attract Australian taxes. Facebook, Google, Vodafone and so on operate here whether or not they declare their profits in Ireland, the a Caymans or Luxembourg. The ATO should simply estimate the Australian activities and tax it until the corporations come clean.

We Australians have dispensable income to spend on these frivoloties because we live in a stable, peaceful, well-ordered and democratic environment - this environment doesn't come cheap, so everyone needs to pay their taxes. Let the corporates trade only in Somalia, Syria or Yemen if they want to avoid taxes - in Australia it's the tax base that keeps us stable and peaceful.

Of course, you think taxes are evil and tantamount to government theft of private achievement - so I suspect you're happy that corporations are 'smart' enough to use their wit to avoid them. I don't think you really understand where our peaceful society comes from. Gina et al contribute nothing to the peace and stability you enjoy. If it were up to her she'd pay no tax, hoard even more money and pay workers the minimum it took to stop them taking up arms against her. Or hire more security, whichever's the more cost effective.

Dugong:

I don't disagree, but the transaction in the above example seems to be a Cayman Islands transaction, so Cayman Islands tax (or lack thereof) would apply.

The Internet makes it a lot more challenging, but effectively the Australian shopper accessed a Cayman Islands shop (the site on the server) and purchased there.

If we applied "Australian transactions need to attract Australian taxes" then Australian tourists in a shop in Hong Kong would have to pay 10% GST, and while we already do that for online purchases over $1,000, it is impossible to do that for company tax for a shop located in a foreign country.

Rae:

a:

08 May 2014 10:23:58am

I don't know what planet you live on, but offshore profit shifting is as old as taxation. A foreign company can buy good off its parent company at any given rate. The foreign companies don't care if the money is made here or overseas. They can be based in tax havens and have the big profits end up there and small profits end up here just to keep the operation/sales outlet open.

blax5:

08 May 2014 10:25:06am

The Australian government cannot do anything about the Caymans directly, but since the Caymans and the other islands are British territory they can pressure the British government to reverse or modify the decree by some King George about 250 years ago. Devise a list of pressure points and then apply them bit by bit.

We could even have a petition to our Head of State, Elizabeth II, to reverse the decision by her ancestor. Even if her powers for that are limited it will get the ball rolling because too many countries suffer from this internationalisation of profits at the expense of nations. As long as Britain is in the EU, you can talk to Brussels, where they will be all ears. When the Caymans & Co are brought into line with other tax jurisdictions then their negative influence should be less.

What we see at the moment is internationalisation of prices, e.g. gas when we pay, and an internationalisation of profits that shortchanges us which is a double whammy.

atp3:

08 May 2014 11:26:13am

"they can pressure the British government to reverse or modify the decree"? Not really, the UK can sack our democratically elected MP from leading the country. They have done it before they will do it again if they want. In the US they just shoot politicians to reelect a new one in line with the corporate agenda, in Australia a foreigner can just sack them. No need to kill them here, unless of course they start telling eveyone whats going on. The point being, pressuring the Uk or the US to do anything is useless. They do as they please here. Is the RBA allowed to lend the government money? Nope, we have to borrow from foreigner banksters and money printers.

a:

08 May 2014 12:52:32pm

Yep, austerity is another way of saying the rich get richer and the poor stay poorer. Look at how the gov wastes money, its endless. Austerity is used to justify selling assets to foreign corporations and cut gov services so that foreign corporations can sell them back to us.

DiogenesNT:

08 May 2014 7:10:08pm

Hi Peter, Norway has no problem taxing its natural resources. We can do something similar. As for internet sales, can we tax the supplier on the destination of the goods or the IP address of the buyer? I don't have an answer but there must be a solution out there. We must find a way to tax the likes of Apple, Google et al or money will flow out faster than it flows in.

I think I think:

Peter the Lawyer:

08 May 2014 9:12:32am

It would seem that the Grattan Institute is in favour of the Deficit Levy being mooted by the Government, though I notice that the author of this article is not able to say so specifically; he just says we need to increase taxes.

I think there are two real differences between the carbon tax lie and the deficit levy lie:

1. The Coalition did not support the carbon tax out of principle, specifically campaigning against it, whilst the ALP will only block the deficit levy for political reasons, as it is in fact a tax dear to the hearts of most ALP supporters;

2. The deficit levy will not effect as many people as the carbon tax did, because the carbon tax was factored into prices of goods and services acroiss the economy, whilst the defivcit levy will be a hit in the hip pocket of the better off, who are mostly Coalition voters anyway.

So what you have is Coalition voters paying for the utter failure and disgusting management of the Rudd/Gillard fiasco of a government.

This might sound like good politics to some in the Liberal Party, but I think that it is dangerous to alienate your supporters just to score cheap political points against Labor.

Rocky:

08 May 2014 10:00:22am

No Peter, he was arguing for long-term structural change to the budget that targets areas that will become increasingly problematic over the next 30+ years, not a short term band-aid designed to make expenditures relating to direct action and the ppl look a little more balanced.

If you re-read the article you will see that he has not supported a tax increase anywhere - he has simply advocated closing down avenues for aging baby boomers (and gen xers i guess) to minimise their tax liabilities through fixing super and negative gearing provisions.

Jase:

08 May 2014 10:44:36am

It's not fair Pete, I can't fit 'Jase the Electroencephalograph Technician' in my profile. Anyway, Mr Abbott made a very big deal about Ms Gillard going back on her word. Mr Abbott is now going back on his word. The position is hypocritical. That's why he shouldn't institute the debt levy.

Redfella:

08 May 2014 11:35:40am

Although I agree with the logic in your comments I think you oversimplify the situation by not looking at the reaosning behind the taxes.

The carbon tax was designed to transition to a trading scheme, to allow the market to drive increased sustainability in the mining and energy sectors - to reduce the severity of risk caused by global warming. As with your comments regarding the progressive's love of higher taxes for higher earners, a carbon trading scheme should be dear to the hearts of conservative voters who want the market to rule everything.

The deficit levy is supposedly a short term tax on the wealthy to help balance a budget position. It will most likely reduce interest payments on the current budget deficit, but as a result will impact the amount of available cash in the economy, as well as making no signficant structural change (long term impact) to the future direction of Australia.

Your comments regarding the Rudd Gillard fiasco are tired. It was the banking sector that led the world into economic down turn - the same banking sector that the conservatives regularly bend over backwards for.

EM Laidly:

08 May 2014 1:32:02pm

@Peter The Lawyer"The Coalition did not support the carbon tax out of principle,..."The principle being that of protecting the market value of fossil fuels. who are already externalising their health and environmental costs onto the taxpayer.

You forgot to mention that 50% of the carbon tax is recycled into the the renewable energy industry which not only employs people but has NO health and environmental costs to externalise onto the taxpayer.

BTW: The evil, evil, evil carbon tax brought in by Green / Labor increased the CPI by 0.7%.The "sensible" GST brought in by the Coalition increased to CPI by 2.3%That would be a factor over greater than x 3 so tell me: which is the Great Big Tax?

harry:

08 May 2014 3:24:24pm

There are lots of health and environmental issues in the production of PV cells. The materials use to make them, and the byproducts of production are extremely toxic. Also there are health implications for people unable to access enough energy due to the products providing significantly more expensive power.

harry:

Reagan Country:

08 May 2014 4:03:57pm

Isn't politics consistent entertainment?

I find it bordering on hilarious that the Greens and Labor are arguing against a tax on those earning $180k+, and that this very tax is being proposed by the LNP. I find it highly amusing that the free marketers of the LNP don't support a free market approach to climate change while the Labor / Greens parties favor a policy that could well be open to corruption by the big banking moguls they claim were responsible for the GFC. I find it very strange that the Labor Party and the Greens are indicating they'll vote against measures to tighten the rules around who gets welfare, thus prolonging the Howard era explosion in middle class welfare which is so damaging the structure of the budget.

The more I look at it I wish we had a Presidential style government where members of a party argued their case for party leadership in full view of the public and the ultimate choice of electing the head of government falling to the people. I'm sure if this had been the case last year Malcolm Turnbull would have won the LNP nomination in a landslide and personally I think we'd be much the better if this was the case. As for Labor, it probably would have been a toss-up from either Julia Gillard or Kevin Rudd.

harvey:

08 May 2014 8:20:31pm

I have to agree with you RC, it is ludicrous that the Greens and ALP are protecting the $180 k battlers. I would have more respect for them if they argued on principle,rather than the nahnahnahnah stuff of if they want it we will stop it.

We need to go back to a decent tax structure, not the rubbish we have now. Anyone with brains in the ALP and Greens would know this.

Real Labor:

09 May 2014 8:57:40am

Keating knows this. He was fantastic on late line last night. If only we could have a government of the vision, leadership and commonsense that Keating and Hawke provided. Oh, well, at least until Tuesday night, dreaming is free I suppose.

James Picone:

08 May 2014 5:49:04pm

The doublethink is incredible. The Liberals give serious indications that they will raise a variety of taxes after explicitly promising not to, but that's justifiable. Labour starts an ETS earlier than they said they would and without a particular community consultation scheme, in a minority government, and suddenly it's the biggest political deception ever.

As a lawyer you should be entirely capable of understanding the difference between the emissions trading scheme that Labour legislated and the carbon tax that Labour ruled out, especially given that the interview in which Julia Gillard famously said "no carbon tax" also included the comment that they remain "committed to putting a price on carbon", rather strongly implying there's a difference in the schemes. I think it's deceptive that you continue to imply that instituting the ETS was a broken promise of that magnitude - complain about it coming in earlier than they originally promised, and complain about the lack of community consultation that was promised, but don't claim that the entire scheme is a broken promise.

Incidentally, I'm not actually sure on the demographics of voters. I suspect that there are substantially more high-earning left-wing voters than you think - inner-city latte-sipping chardonnay socialists, as the saying goes. Well-educated people trend more socially liberal, a measure that the Greens and sometimes Labour beat the Liberals out on, for example. Strong opinions on the urgency of climate change are very much in evidence amongst high-earners that don't have a direct financial stake in fossil fuel, and that's another field the Liberals have historically been awful at. I suspect the long-tail of very, very high earners in Australia are almost overwhelmingly Coalition voters, but people who earn between median income and twice median income might skew Left - there'd be a fair few academics and journos in there, keep in mind.

a:

08 May 2014 9:15:05am

If the government really cared about ballooning costs maybe they could think about:

1) reducing politicians salaries, pensions, travel etc when they retire2) Paying for overpriced US war birds3) contributing billions for what will be privately owned toll roads 4) Spending $100m + on dodgy search and rescue operations for planes on the phony advice of foreign governments that never entered our search and rescue area and left no radar signatures on any of the navy's radar stations or war ships.

Of course none of this will ever happen, as the LNP is being paid to sell of all public assets and to strip services to favor US based corporations and have user pays. The government is in the business of collecting tax, not providing services. What do we pay tax for?

a:

08 May 2014 9:57:29am

1) The point is the govenment do not care about saving money, they are on the one hand making kids pay to go the doctor and at the same time payinh Howard etc all expences paid for the rest of his life.2) If we bought planes of china they would be about 10% of the price but they would be hacked straight into china, the same as the joint strike fighter3)Contributing billions to privately owned toll roads is a total scam.4) The crash site, where is it? Was it able to fly over Indonesia, over Christmas and Cocus Islands and the entire navy without someone picking it up on radar. The point of the matter is, it did not crash there or come anywhere close but Abbot spend $100m+ on a dodgy old US satellite picture without any other information. You can be assured that if it flew in from indo it would of been picked up. The money spend on it and the military people wasting there time and resources on it was a total scam.

Tator:

08 May 2014 10:20:22am

a,civilian radars don't actually detect the plane but the transponder. It has been mentioned that the transponder had been switched off so only military radars which detect the actual airframe would have been able to track it and most third world nations do not have a comprehensive radar coverage of this type in peace time.

a:

08 May 2014 1:01:11pm

There were 5 military radars on the plane and it vanished at the same time as when the transponder turned off, coincidence? Can a pilot do all that? Our PM believes it came here and flew right over our radars and our navy somehow missed an unidentified 777 reported missing not far away, thats why he spent the $100m+ right??

Tator:

09 May 2014 2:45:22pm

Are we talking a military air traffic control radar or a military air defence radar as the ATC radars still work on transponders whilst air defence radar uses the traditional use of radar to detect airborne objects.

John51:

Sync:

08 May 2014 2:44:01pm

All the outcry about spending misses the whole point. Expenditure hasn't risen by all that much. Revenue has seriously declined however. Our pension rates are relatively ungenerous by world standards however our tax rates are significantly lower than most developed countries.

harry:

08 May 2014 3:28:44pm

The government doesn't get its revenues from the GDP. So comparing it to the GDP is silly. Year on year government spending rose dramatically through the Labor years, increasing by 15% in one year alone. It remains above trend 6 years later.

Jess:

jack:

08 May 2014 3:48:46pm

Actually, there are quite a few thousand ex pollies at both the state and federal level suckling at the public teat. We have paid John Howard some $3.5 million since he was unceremoniously fired by his own electorate. Costello, Downer, Mirabella, Swan, Gillard and Rudd to name but a few that will cost us several millions before they expire this mortal coil. Many are already very wealthy. When Malcolm Turnbull retires, he will draw a goodly pension even though he is already worth a few hundred million. When you have Newman and Abbott cutting programs that cost us less than a million a year, just to show they can cut, then surely there is a place to debate the very large, even corporate, golden handshakes lollies get on our dime. As for number 3, it may be our problem, but since nobody knows for sure where the crash site is, and Malaysia is quite well heeled, and they are actually the ones who lost the plane in first place, then they should pick up the tab.

a:

08 May 2014 4:56:25pm

True, pollies are all overpaid and forever safe for the cuts they make. They will be fine, there children will be fine and there childrens children will be fine. It makes it easy for them to make the cuts if they are not effected by them. As for number 3) the point its we can spend $100m on the drop of a US hat knowing full well its not there, but we can't get poor kids to the doctors for free. That is where it is at. We can go in and invade 2 countries but we can't look after our own citizens. That is where it is at.

a:

08 May 2014 10:27:48am

I'm not taking sides, there is no difference between the ALP and LNP, they both work for the same crew but both market to different areas of the voting market. At the end of the day they are no different, they both are controlled by foreign interests. One gets us into debt so that the other one can sell off public assets to there mates who pay for there oxfordisations and election propaganda. The 2 party system is an elaborate scam, its the easiest way to take control of a democracy and there military.

a:

09 May 2014 8:59:35am

Yep, when the LNPLNP control everything in australia, which they have done for the last 50 years or so, there is no other alternative, they can tax and strip and tax and strip until there heart is content, that is until we are all paying for the services which use to be free so that they can give all our money to there political donors.

Its going to be a choice between dumber and dumber until the 2 party system is seen in the full light of the constitution. There is no office of the PM, it is completely contrived. No one MP has more power under the constitution than any other, they are all equal. Why is a MP ever referred to as the opposition, they are not, they are part of the government. Things have gone astray to benefit the corporations who pay election bribes to have there way with our budget and military.

Until we all wake up to this we can expect more taxes, more selling of public assets and have to accept that we are not sovereign, we serve foreign governments and corporations to the detriment of our people and environment.

a:

08 May 2014 10:19:34am

Is it a "conspiracy theory about running Australia for the benefit of corporations"? Stop for a moment and look behind the veil. We are being told one thing but we are not told about what it all means. What happens when the government borrows money, who do they borrow it from?

To borrow it you need to overspend on a lot on big ticket items, such as toll road, war birds, new jap subs, wars etc. The same thing happened to the US gov. So who benefits when the government borrows money from overseas? Who paid for Abbots oxfordisation? The Au banks are broke, they can't lend it to the gov. The RBA doesn't lend money to the gov any more. The US gov is broke, the US banks are all broke. Who prints the money to lend the money? Who has got all the money? If this group has so much money is it likely that they will be paying our politicians to do there dirty work?

So the point of the matter is, if the government wanted to save money they could, but they wont. They are conspiring against all australians to sell off our public assets to the wealthy corporations. The wealthy corporations have a;ready bought up most of Australia.

Who are the major shareholders in Australiaa big four banks for instance??? They are all the same group of 4 US investment funds. They can buy up any Australian business on the stocky and buy up any piece of Australian land, buy up Australian media and information network and Australian politicians and political parties.

We are so far gone, that no journalist writes about it. We have ex PM's closer to the death who are brave enough to talk about it, but no one else.

Michael:

atp3:

08 May 2014 11:46:17am

Who has got the money to buy the bonds? All governments of the world are in debt, probably with the exception of china. All US banks are broke, all Australian banks are broke. So who buys them and what do they mean, are they tangible assets, do they then have a mortgage on Australia with the nation as its collateral? We used to self finance, why don't we still? Is the government still paying off the Sydney Harbor Bridge and will never pay it back, was that a bond or a loan?

a:

08 May 2014 2:20:28pm

So are the bonds tangible are they backed up with security? Can one company buy them all up? What happens when the US can't pay back its trillions of dollars in bonds to China? What recourse has china got on there investment?

Is there another way for a nation to generate its own credit? Did Australia use to do that until another country told us to stop that immediately and borrow from there money printers

yourvoice:

08 May 2014 11:36:39am

Unfortunately, you are correct our political parties and our so called representatives do not represent this country.At best they only represent themselves, but generally they do what they are told. True democracy in this country is a myth and boy are we paying for it. We need real politicians who care and work for the interest of this country, not wackos who continually rubber stamp everything.

We need to reinstate The commonwealth Bank to its former glory and remove the parasitic banks from this country. Remove the wacko's and political parties in our parliament they represent. I know its a big ask, but something must be done. At the very least we need to bring in CIR (Citizens Initiated Referenda) into this country. The population badly need a voice that must be taken seriously by our parliament, CIR will do this as it will be legally binding on parliament. We could use CIR to remove unpopular decisions from parliament and new legislation, hell we could even use it to remove politicians that we feel are unfit to represent this country. There are many more things that need to be done but at least this would be a start.

Reagan Country:

08 May 2014 8:00:34pm

A, did I read correctly? Are all Australian Banks broke? If so, can you please explain how you came to that conclusion, i.e. what are their profits, EPS, capital adequacy ratios, B&DD, Net interest margins, fee income, costs etc etc? As someone with a bank account I'm keen to know the basis of your assertion.

a:

09 May 2014 9:04:42am

Do some reasearch, find out how much money that bank has lent out and then check its cash reserves. The point of dropping the gold standard was so that banks can lend money money than what they had its called fractional lending. If they weren't broke, why did the government guarantee there security, they are free to gamble on whatever they want and the tax payer will pay there bills. That is what i would call broke, they have got no money, they have got lots of debts. If everyone went in and withdrew all there money, they could not repay it all. If you didn't know that you probably also wouldn't know they are majority foreign owned by the same 4 US investment houses. That who the gov is insuring, 4 foreign banking cartels.

Reagan Country:

09 May 2014 1:43:36pm

A, Australia's banks are very stable and a long, long way away from being broke. To suggest otherwise is both dangerous and false. You really need to familiarize yourself with the principles of banking and finance.

a:

09 May 2014 2:38:35pm

If they are so stable and far from being broke, why did the government have to guarantee their deposits? Do you know what fractional lending is and why the gold standards was dropped? Who owns most of our banks? If everyone went to withdraw all there money from the banks could the banks pay it all back. Once upon a time they had to have gold to ensure that deposits could be repaid, not any more, they don't even need the actual money. So if they don't have the gold or the money how would they pay everyone back the money they have deposited? You would quickly find they were all broke.

Reagan Country:

09 May 2014 2:58:01pm

So A, your definition of a bank being broke is that it is broke if at any one time it doesn't have sufficient cash reserves to honor the total withdrawal of all deposits by all customers. This approach would result in no lending and almost certainly result in a major economic depression.

The Rudd government guaranteed deposits up to $1 million in 2008 to avoid a run on the banks as happened in the 1930s and contributed to the great depression. This has since been reduced to $250,000 and there are calls for it to be abandoned altogether due to the distortions it can create in finance markets by favoring the banks over non-bank lenders.

By the way, I suspect by 'fractional lending' you mean 'fractional reserve banking' or 'fractional deposit lending'.

PW:

08 May 2014 3:03:12pm

"4) Spending $100m + on dodgy search and rescue operations for planes on the phony advice of foreign governments that never entered our search and rescue area and left no radar signatures on any of the navy's radar stations or war ships."

Sounds like you know more about the missing plane than the search experts. You should get in touch with them if you are so sure it isn't where they think it is...they may call you a crackpot but don't worry about that.

Blzbob:

08 May 2014 9:19:11am

I like Abbortt's "wealth tax"1% on $100,000 ... 2% on $200,000

I don't think it goes far enough.Why stop there?If as he says the wealthy should pay more then keep on going.3% on $300,000 ........ 4% on $400,0005% on $500,000 ........ 10% on $1,000,00050% on $5,000,000 ........ 100% on $10,000,000

a:

08 May 2014 9:39:33am

I doubt that the tax will raise any money at all. Abbot will leave massive loopholes in it to let the rich off. The rich can afford the best accountants and lawyers. This is just a smokescreen to claim the LNP are taxing the rich, not just persecuting the poor and cutting medicare and selling of public assets to the US. He has got to appear as if he is going after the rich while he scews the poor into a pulp. Its all part of an elaborate scam.

Blzbob:

08 May 2014 4:07:08pm

If it is fair for someone on less than $25,000 to pay 15%, then someone on $50,000 should pay 30%, someone on $75,000 should pay 45%, someone on $100,000 should pay 60%, and so on.So why should those earning the least pay so much?

a:

08 May 2014 5:01:18pm

"So why should those earning the least pay so much??" Because they can't afford to buy politicians to have there voice heard, only the wealthy can. That is why. No one pays 15% taxation, between the 3 levels of taxation and thousands of taxes, most of the money one gets on a small income is still goes in tax, they are just so hidden we don't see it. The rich have good accountants with good investment strategies and get out of most of there tax, same as corporations.

Andrew:

a:

09 May 2014 1:05:07pm

One tax would be heaps better, thats what the constitution declares. However, taxing the back end is not the right way to go, If you tax the back end, the poor pay tax on 100% of there income while tht rich pay on only part of there income and save the rest or take is OS. If you tax the front end you tax on all income, meaning the rich and the poor pay %'s of income. Unfortunately the government does not want one tax, they want thousands over 3 separate jurisdictions so that it is so complicated we don't know how much tax we pay.

CJB22:

08 May 2014 10:30:05am

Scandinavians pay much more tax than we do and are doing quite well thank you. They didn't stop work when they reached the 50% tax figure. Why? Because their benefits are so much greater than ours in retirement.

atp3:

08 May 2014 11:14:16am

Do Scandinavians have 3 levels of taxation and thousands of hidden taxes that make it so complicated that you have no idea of how much tax is actually paid? My guess is we pay the most tax and now the government wants to strip services and public assets to there foreign mates.

a:

08 May 2014 12:05:04pm

The problem is when they drag out a percentage of GDP as tax, it is only ever one level of government doing it. They don't mention State taxes and local council taxes in the same sentence. A Fed MP has no jurisdiction to inform us of state or local taxes and vise verse. Our taxation system is so complex so that we cannot fathom how much tax we actually pay. If we don't know how much we pay, there is nothing to complain about. The Constitution says the government can collect one tax, we have got thousands and thousands of taxes.

Gregory:

08 May 2014 11:22:29am

Ive quizzed a few Norwegian mates on this.

There is a reason why they are ALL so happy.

The difference is the wealthy are happy to pay more tax because ALL (including them) get to use the same social benefit. All get healthcare. All get education. All get pensions. Not so means tested as Oz.

atp3:

08 May 2014 11:51:41am

If we just had one tax we would all know how much tax we pay and that is why the constitution says the government can only have one tax. The governments agenda is to rake in as much tax as possible so that we can give more to foreign corporations who pay our ruling elites education expenses and election/propaganda campaigns.

There wont be a public health system soon or public jails or public water suppliers or public electricity suppliers or public roads or public ports or public airports or public media if the LNP have there way. The objective is to sell it all off so that there foreign mates can charge us for theses services and make more money.

Redfella:

08 May 2014 11:44:12am

It's more to do with where your taxes are spent. It is hard to compare ourselves with Scandivnavian countries because Australia is so much bigger and therefore the efficient supply of infrastructure and services costs more.However I totally agree that they spend their tax income much more wisely, by benefitting all with cost effective and quality education and health systems - stuff governments should be managing!!!Not to mention Denmark's oil soverign fund. They manage their income very well also. Every Dane has $1m to their name (although of course they can't spend it on flat screens - baby bonus anyone?) because the govt kept their oil production nationalised. No off shore profits, no giving your finite resources away for next to nothing. Mining tax anyone?

a:

08 May 2014 1:04:31pm

I disagree redfella, its more to do with how the money is raised when it comes to taxation. We have got no idea how much tax we actually pay over the 3 jurisdictions. Thats the whole point of having 3 jurisdictions. How we spend it is an entirely different matter, but no less important as it feeds in to why we pay so much tax.

PW:

08 May 2014 3:58:39pm

"Our system actually 'rewards' those who P their life against the wall."

For once, Alfie, I agree with you. Mind you I could easily upgrade my home and take a world trip in order to qualify for the pension but I'd rather be my own boss than beholden to the whims of stupid politicians.

a:

08 May 2014 5:04:02pm

Those people peeing against a wall i am sure still pay there tax even in there retirement. Beers getting pretty expensive these days. As for self funded retirees, living a life free of the government is a bonus

Blzbob:

Anyone with more income than another is obviously wealthier than another.

Where do you draw a line? as it is obvious that you think one could be drawn.we know the minimum income can be zero dollars, so where would you put a maximum?

I've already suggested that more than one line could be drawn, and that they should all be drawn between a chosen minimum, and a chosen maximum.Lets add some lower ones, of 0.1% on $10,000 per annum, and increase them at every $10,000 increment.

John51:

08 May 2014 10:29:20am

I agree, we need to reestablish another two upper tax levels. That way we can reestablish the progressive tax system Howard shrunk in his vote buying spree. That way you could also reduce the lower two tax levels.

Blzbob:

John51:

08 May 2014 4:59:31pm

There is not only a lot of silly things in that report. Most of them go into the absurd if not destructive to the economy category. But of course anyone who has watched this lot long enough realise the report is only there so they can see why look we are the nice guys we have not hit you as hard as was recommended.

We can all fall for that if we fell like get sucked in by it. I don't prefer to myself.

Zany:

Kerrie:

08 May 2014 9:22:17am

This article is insultingly simplistic. The issue is how quickly we should reduce the debt, not whether we should remove it. Using the article's analogy, Abbott wants us to go on "The Biggest Loser" style of weight loss program . The problem is that most experts don't think "The Biggest Loser" program represents best practice, is sustainable or should be attempted without supervision. (The trips by contestants to the hospital should highlight how dangerous this "weight loss" program is.).

a:

08 May 2014 9:41:51am

The debt crises is a manufactured crises to create the fear to facilitate the LNP selling off everything to the US and cutting services. It is not real, if it was real they could stop paying for privately owned tollways or stop buying overpriced us war birds or reduce polies salaries. They are not going to do any of that, so it pretty much shows you what they are all about.

Kerrie:

08 May 2014 10:29:25am

I totally agree, a. There is debt, but no crisis. There are other solutions to the ageing population crisis: voluntary euthanasia for the terminally ill, reduced spending on research into life extending treatments. . . Once upon a time it was considered a part of life that older people would die from strokes, heart attacks and cancer - now we spend money trying to prevent it and then complain about the cost of supporting a long-lived generation. The problem is this ideologically driven government doesn't want to tackle the big issues, but want to see life through the prism of money and the economy.

Reagan Country:

08 May 2014 11:36:24pm

Kerrie, do I read you correctly? Are you really suggesting that the solution to our aging population problem is to reduce our efforts to improve the longevity and quality of life? I really do hope I've mis-read you and that your comment was tongue in cheek. If I haven't mis-read you, then I feel sorry for you. As one who not so long ago lost an elderly parent to cancer, I find your comment quite hurtful and lacking compassion.

a:

09 May 2014 9:25:15am

So we can't deal with the aging population now, but we can deal with the current population and migration explosion right? What does the future hold? A bigger population is going to be more to deal with and we can't deal with it already. Who is the captain of this ship and where is it taking us?

Do we get a choice to decide or is it all predetermined? The argument is we need to increase migration and the population to pay for the aging population, but who pays for the massive population in the future? Do we just keep growing exponentially to keep chasing our tails or is this just a good way to condition us to abandon our environmental sustainability and expectations?

Reagan Country:

09 May 2014 9:56:11am

So A, what is your solution? Compulsory euthanasia when we reach 80 years of age? I seem to remember a movie about that in the 1970s, Logan's Run I think it was called. Frightening really if someone actually supports that. Please tell me I've misunderstood you.

a:

09 May 2014 10:26:45am

If you want a solution, go ask a pollie, that is what they are paid to do. I am just saying we think the answer is increase migration. This is what got us into the mess in the first place. We can't pay for it now but the bills in the future will be bigger than what they are now, so what then? What direction are we going? Who's steering the ship? How much can our environment sustain? Do we want to live like sardines? Do we have a choice?

Population growth means environmental destruction, plain and simple. So what is the answer more people? The problem is the government does not work for the community they work for political donors who benefit from wars, war machines, mining and development.

Reagan Country:

09 May 2014 2:23:45pm

A, you seem to have a very cynical view of Australia's politicians. I agree the current bunch might not be as talented as they were a few decades back, but I also believe the vast majority enter politics with the best intentions to serve the Australian people. This applies equally to LNP, ALP, Green, PUP etc etc. Thankfully, despite its current profile, corruption in Australian politics is not common.

I sympathize with your point about the dangers of population growth on the environment, but I'm also conscious that we are a very wealthy country with a high standard of living and that there are a few billion people in the world who see the things we take for granted (e.g. clean, running water, access to a healthy diet, shelter etc.) as a luxury. When someone who is down on their luck knocks on my door and begs for help I lend assistance. What do you do?

And Justice for All:

no offence but:

08 May 2014 2:41:56pm

Yep - a manufactured problem.

Just like climate change?

The government is showing me that they respect tax payer's money and are trying to spend it carefully - that seems to be what they are all about. Rudd - Gillard - Rudd appear to have seen our money as their money - to be given out willy-nilly to whichever politically expedient cause celebre was in vogue. I am pretty sure we don't need any more Arts degrees to be subsidised or public jobs to be created to fudge the unemployment figures.

Debt is debt. It must be paid. And it must be paid FIRST - before anything else. By all means, spend surpluses on 'thinkers in residence' and 'community inclusion officers' but deficits call for a focus on addressing needs - wants can wait.

And why don't you like the US? Surely you are not racially discriminating against an entire nationality?

a:

08 May 2014 5:11:34pm

The people of the US are in the same position as us, corporations have taken over there 2 party system and central bank and have sent the government broke and commandeered its military. The military does what the white house says, how does one buy the white house, the same as political donations in NSW etc, money buys propaganda buys votes buys office buys the military buys the foreign agenda. Ever since the end of WW2 especially Vietnam, the US have taken over Australia and its military. They go to war - we go to war, thats taken over. We have to pay our contribution as there attack dog. If they start a war, they will tow us straight in and make us pay. What does that say about our political system and the need for independent media in Australia?

Reagan Country:

08 May 2014 11:43:28pm

A, if nothing else you have convinced me that we need to spend more on education, as your grammar is appalling. For example, when you refer to American two-party system, the word you are looking for is 'their', not 'there'. As for the rest of your posts, I'm just grateful we live in a free country with freedom to express views in forums like The Drum. Otherwise we might miss out on your posts which really are quite humorous.

a:

09 May 2014 9:47:40am

I'm glad you appreciate, its great to see you can decipher between poor grammar and the moral of the story. I guess if a foreign company had paid for my education and oxfordisation, like our PM, we wouldn't be having this discussion. Maybe all our politicians and ruling elites education should be foreign, that would fix everything?? Long live the independence of the ABC.

Reagan Country:

09 May 2014 2:34:59pm

A, you seem to have a problem with Tony Abbott going to Oxford courtesy of a Rhodes Scholarship. Do you also have a problem with Bob Hawke and Kim Beazley being Rhodes Scholars?

Also, what is this foreign company that paid for Tony Abbott to go to Oxford via a Rhodes Scholar? I'd hate to think that this company, by way of breathtaking foresight, was able to sponsor Tony Abbott through Oxford University on the off chance that some day in the distant future he would be Australia's PM and therefore be able to return favors. A company with such foresight must be doing extremely well financially.

TC:

08 May 2014 1:06:42pm

Just wait till the budget. There will be measures to start rectifying the structural deficit, but it won't be a shock budget full of nasties. They won't be 'cutting to the bone' as an hysterical Wayne Swan kept saying on this morning's radio. However Australians have to be made aware that we need to live within our means and spending more than we earn on recurrent expenditure, ie not infrastructure or assets, and expecting our children and grandchildren to pay it back is not fair.

a:

08 May 2014 1:31:24pm

The facts of the matter are the government is stripping public assets and services as this is there agenda. They have to create a debt crises to try and sell it to the community. We have got plenty of money to invade other countries, but new overpriced us war birds and jap subs, just no money for kids to go the doctor or get prescriptions for free. We have to get our priorities right??

Reagan Country:

08 May 2014 11:50:04pm

Hello again A. To ensure I don't misunderstand you, it seems you want Australia to have a foreign policy that is independent of the USA, meaning we don't support the USA in time of war and therefore logically, vice-versa. You also don't want us to invest in our defense forces. So if our security was under threat, and we no longer can count on the USA for help, and we have next to no military, how do you propose we defend ourselves? I like to sleep well at night so your visionary foreign policy that secures our borders will be quite reassuring.

a:

09 May 2014 10:00:20am

We are an independent sovereign nation, not Americas attack dog. The other side of your argument is we are duty bound to invade any country the US wants, even without a UN resolution. Is that what you propose? Are you happy to see Aussies die in pathetic money making schemes for foreign corporations in foreign lands? That is what is happening and I for one, i disagree.

We do not have to pay for Americas wars with our blood or our money. If they want to go and blow up foreigners let them do it without us, they are only sending themselves broke which will of course be there downfall. We do not have to follow the same path. I am sure we would help them out if they were being invaded, but to go to war on the drop of a hat because they say so, that is terrorism. We are better off being independent and part of the UN, than being a bully. The bully will end up getting bullied because of there actions, that is the position we are now in unfortunately. The US rules Australia politics and military, the sooner we realise it, the better for the world. The US knew months before we did that Rudd was being disposed, all thanks to aussie MP's giving information to there foreign mates.

Why should Australia's foreign policy be Americas foreign policy? Are we a a state of the US yet? Did Vietnam, Korea, Irag x2 or Afghanistan help us or just kill Aussies and make us terrorists? By justifying and supporting US invasions, do we facilitate their invasions?

a:

09 May 2014 11:16:47am

Rae, that is what i said. The gov can't get away with stripping assets to foreign mates and stripping services from tax payers without a crisis. You would not be able to sell off medicare without a crisis, that is for sure.

The gov wants to send more money overseas and create perpetual debt, to do that u need to make the claim that they need more tax and less spending. Meanwhile the guys that paid for Tonies education and his campaigns peck like sea gulls on the remnants of our countries social infrastructure.

What we used to get for paying our taxes we are now going to have to pay for, things like jails and police forces will be all privately owned, new roads and national highways will be tolled, hospitals and doctors will be user pays, education will be user pays - it already is, Reserve bank and the mint will be privately owned if they are not already. Electricity, water and sewage will all be foreign owned. Our mines are mostly foreign owned, same as our ports, airports and information services. What does that leave us with?

Nothing, thats the point. We have sold our selves off under the 2 party dumb and dumber system where election bribes pay for policy decisions.

Reagan Country:

09 May 2014 1:41:36pm

Rae and A, I was putting together two streams of thought A had provided over several posts. In one post A was pointing out the possible inconsistency of spending a lot of money money on defense due to the alleged budget crisis. This is fair enough, but elsewhere A said we should abandon the American alliance. I was pointing out that if both were put into practice Australia would be severely exposed to foreign aggression. If Australia chooses to abandon the US alliance well and good, but it will come at a cost to the budget by way of increased defense spending or at a cost to our security.

a:

09 May 2014 2:47:54pm

Funny you found the consistency. Yes we are buying lots of weapons we can't afford or value them more than our kids health. We are buying them at top of the market price from the US. We paid to have a private US company develop them now we buy them at there set price. So who's planes are they are they ours to use how we want or they by surrogate Americas because if they go to war we go to war? So are we buying our planes for us or them?

If we were independent perhaps we could buy better planes at a fraction of the price on the open market. We are the US's best client and that is why they own our politicians and contribute so much to there election propaganda. They bought out both the ALP LNP and the Gr's. The notion that our government works for us is a thing of the past. Our governments works for foreign interests, not Australias interest.

An alliance with the US does not necessarily mean we become another state of America, but that is what we have become for good or bad. But if you look at the ownership of Australia, its pretty much all been sold off. Keating sold Australia on the US stocky in 1986, the US didn't sell themselves on the Australian stocky, i wonder why? It probably is not in there national interests. We can't raise our own finance anymore as a free nation use to be allowed to do, we have to borrow it from OS money printers

Reagan Country:

09 May 2014 4:04:08pm

A, I sense a lot of anger in your posts and you make a lot of very serious accusations, but so far you've offered no supporting evidence. If what you say is true I am very concerned so please can you offer up something to support your accusations?

Kagey One:

08 May 2014 9:22:42am

If tightening budgets will lead to unemployment, why is our government initiating policies that appear likely to hit the most vulnerable (which includes those losing their lower-strata incomes)?Wouldn't it make more sense to bolster support for unemployed if your policies were knowingly shaped to increase their numbers? Or am I making rash assumptions about the economic "strategists" giving a damn about anyone on basic income?

a:

08 May 2014 9:45:09am

If you think the LNP give a crap about people on basic income think again. People on basic income don't pay election donations. The plan is to sell off all public assets to US companies that pay Abbots election propaganda and paid for his oxforisation. To do that he first needs to create the fear so that people can buy into the scam.

Reagan Country:

09 May 2014 1:50:06pm

A, I assume by 'oxforisation' you mean Tony Abbott's Rhodes scholarship. If so, are you suggesting that a foreign company paid for Tony Abbott's Rhodes Scholarship and that this same company is now seeking repayment by way of political favors via asset sales? If so I suggest you advise the authorities with some hard evidence as that would be serious corruption. I don't suppose you'd be willing to enlighten us here with some evidence?

the yank:

08 May 2014 9:23:04am

You see the difference here is in the use of the word MUST reduce expenditure. As far as I am concerned that hasn't been proven.

The Liberals ASSUME there will be a shortfall in money available to pay for our present life style but I don't believe them. We are sitting in THE economic boom area of the upcoming financial world. Asia in a very short period of time will require tons of resources and talent to manage their growth and Australia is sitting pretty.

There has been plenty of evidence that on the Federal level the problem has been on of revenue. You don't increase revenue by trashing an economy that is just starting to find its feet.

THE key is to position Australia so it can take advantage of the coming Asian boom. We do that by spending more on education, more on health, and more in areas of resources especially food production.

a:

08 May 2014 9:50:45am

True, but is not about the good of the country. It is about foreign government and foreign corporations picking like sea gulls at Australias vast wealth. The LNP want us to have an overpriced medical system so that US companies can profit. They want us to privatise our jails and police forces so that US companies can buy them and charge Tax payers to put victimless criminals in jail, a very profitable scam in the US. They want us to dig up lots of uranium for foreign nuclear reactors. They want to frack out geology and watertables so that they can buy cheap gas and then have to buy crap GM food off them. Nothing the ALP or LNP do is good for the country, it is about time people woke up to the fact the politicians all serve foreign purposes.

John51:

08 May 2014 10:53:05am

You are right Yank. John Daley has made a lot of claims without putting any substance to them. It seems neither John nor this government understand the concept of whole of government policy process. Yes you can reduce programs and with them costs. But all you are doing is shifting costs and magnifying them elsewhere.

When you fail to spend money, or reduce the money spent in an area, it does not mean the original reason for that spend, that social support, went away. You don't make these changes in a vacuum, although you would think it from this article. You would think health spending did not provide any benefit to the economy, let alone to the individual.

Yes, you can make health spending more efficient, more effective. But that is a whole different debate to what we have been having. The proposed cut to the Medicare payment to the doctor by $6 or even $15 does nothing to deal with creating a more efficient more effective health care system.

We should understand the proposed $6 or $15 feed on top of seeing a doctor is simply an underhand way of reducing the current $35 Medicare payment to see a doctor. I am stunned that no commentator has stated the obvious. And if this one gets in how long before it goes up even further until that $35 Medicare paying completely disappears. The coalition does not like Medicare. It is too much like social health care for the masses for them.

But what is worse in all of this is that all of these suggestions are simply an underhanded way of pushing user pays right across all service provision. If you can't afford to pay than you are left with some third rate service or relying on a non-for-profit organisation to provide it for you. How long before the poor, pensioners and the unemployed have to rely on food stamps like in the US and at the whim of the government.

clete:

08 May 2014 9:29:47am

Abbott could easily make himself popular with the stupid by opening up the Treasury purses and spending on feel good policies, like Gillard and Rudd did. But, you won't see that happen. His government will, like most conservative governments, do what's in the best long term interests of the country, regardless of the criticisms and mindless rants coming from the left.I firmly believe there is not enough of the stupid to foil this governments objectives, before this country has had a chance to recover.

CJB22:

Treetop:

08 May 2014 8:58:53pm

The Howard government spend hardly anything on major infrastructure projects , wasted a lot of money on wars , gave too much welfare to middle Australia , gave tax cuts which is equal to the debt which Labor had in it's last budget , didn't increase spending on education so many professionals and trades people are in short supply in Australia , the biggest part of the Howard government budget came from the sale of Telstra , Mr Costello sold off Australia's gold reserve which are now very valuable .During the Howard years interest rates were high and also housing prices started to become so large that many Australian couldn't afford to buy their own homes Mr Howard didn't have to contend with a global financial crisis yet Labor still end up with one of the best rating economies in the world .

Reinhard:

08 May 2014 12:15:56pm

"...opening up the Treasury purses and spending on feel good policies, like Gillard and Rudd did." You must be referring to the restoration of public education and hospital funding that the Howard govt had slashed. From 1996 to 2007 the feds share of public hospital funding dropped from 49% to 45% while the public educations share of the total federal education budget also plummeted from 42% 35%.

Miowarra:

Revenues have not so much been "falling" as they have been intentionally reduced and their sources have been abandoned and foolishly squandered in one-off sales for ideological reasons.

Instead of constant government revenue streams from Telstra, the airports, QANTAS and all the other services which have been sold off, past governments have grabbed at the chance of a bag of cash RIGHT NOW instead of keeping the public asset, keeping a proper service to the citizenry AND keeping an income stream from the charges and fees.

What has happened is that we, the public, now no longer have the asset that we and our parents paid for in taxes, we no longer have the same quality of service AND we're being charged more for a lesser service.

And this government, operating from the same ideological script is going to do it again and again and again unless they're somehow stopped.

It's time to start talking about re-nationalising some of what has been taken from us and protecting what's still left.

Why should corporate leeches be allowed to make windfall profits from our existing infrastructure?

Mike:

08 May 2014 10:04:23am

And they will do the same again.

Australia Post makes a healthy profit and returns a dividend to government every year. But they will privatise it and take a wad of cash now, forgoing that revenue forever. In less than 10 years we will be behind.

Same with Defence Housing which makes a profit of $1 billion a year. Sell that now and forgo that revenue forever.

John51:

08 May 2014 11:02:29am

And if this government get its way with even further state asset sales for a one off return this problem will get even worse. Just think how much money would be coming into the budget, Federal and states if they had not sold off their banks. And how much better would we be off if the Federal government had not sold off Telstra, or Telecom as it was known. For a start we would probably now have an NBN.

And as you said all of that money was from those one off Asset sales was wasted by the handing out of tax cuts to the rich. It was the combination of both of those that has largely left us with our lower tax revenue and budget deficits. That is that along with the tax cuts also subsidised by Mining Boom Mark 1.

You never give tax cuts off the back of a boom or the sale of assets. That is a major no no. Yet that is what the Howard government did.

anote:

08 May 2014 9:31:59am

It is like the boy who cried wolf but not quite.

The budget needs to be balanced over time but Labour knew that too. It is important but the Coalition concocted an emergency, which the author tacitly acknowledges. Abbott was never constructive in opposition and like the boy who cried wolf got to his position by deceit.

Abbott's PPL sits poorly because it is a welfare scheme that benefits the rich more than the poor, from taxes. It sits more poorly in the declared emergency because of its cost. Yet it survives just because it is Abbott's baby.

There are wolves out there; there always are. The Coalition just delayed crying wolf until after the election.

Since the Coalition are such adamant, deceptive, spin masters how can they be trusted to deal fairly with reality, whether or not the wolf is really nearby?

Stuffed Olive:

08 May 2014 9:57:39am

Of all LNP governments this Abbott mob are the least trustworthy.The solution is to kick them out at the first opportunity and elect a Labor government. The Libs will never voluntarily do the right thing regarding climate change, mining taxes and fair welfare because in these areas they will squander billions to benefit no Australians.

end the rorts:

08 May 2014 9:37:04am

Save $13B straight off the bat: "tighter targeting of superannuation tax concessions (. . $9 billion a year), and ending negative gearing (. . $4 billion a year in the short term).Addressing those 2 rorts would endear the Libs to the working class.Cost?A few irate speculators who believed that high income earners are sacroscant from paying taxes and that the general public should fund losses for so-called "investors" gambling on 2nd hand properties.About time the govt put Australia first, not high income earners, speculators and gamblers.

end the rorts:

08 May 2014 3:57:45pm

Hi Graham,rather than end negative gearing, make it claimable only for new building activities and for purchase of new shares (IPO issuance).At the moment about 92% of loans for "investor" properties are for purchase of existing homes.That means "investors" are chasing speculative capital gains versus traditional investing for rental revenue and practically building nothing (other than the 8% who do). Negative gearing, high Loan to Value Ratios and buyer grants are seriously distorting land values in Aust.This then impacts on start-up costs of new business (either in excessive rents or land pricing). Combined with the high AUD it is little wonder manufacturing/small business is in decline.Tax distortions such as this were highlighted in the Henry Taxreview, but Labor had a brain fade and did nothing. I am hoping Libs are more on the game.

Real Labor:

09 May 2014 12:17:57am

I just saw Keating interviewed on Lateline. With his usual cogent style, he punched so many holes in the arguments calling for fewer concessions on superannuation I stopped counting. He did say however that the actions of the late comers exploiting SMSFs should be tightened. The man is both a visionary and a realist, just what we need right now.

More and more I am convinced that the only way we ever get any descent economic reform in this country is if it is lead by a pragmatic and rational Labor government. Only Hawke/Keating style Labor can engineer sensible concessions from the unions and sell micro economic reform to a skeptical public while at the same time being able to work with business, and do so with a social conscious. The tragedy is that from time to time we get chaotic Labor governments with grand visions but who tarnish the brand due to next to no implementation skills. And what follows, a LNP government with next to no vision and dubious economic credentials. I'm getting a strong sense of deja-vu of the lost Fraser years with the current government.

If only we could clone Hawke, Keating, Walsh, Button, Evans etc and reinstate them into government.

John51:

08 May 2014 4:53:03pm

Please tell me PW, why in one breath we are told that people need to work longer and reduce the cost of pensions. Yet in the other breath you are saying the government needs to subsidise the retirement of the very well off. And not just for a pension the size of the old age pension. But an untaxable super pension no matter how large it is.

As for negative gearing you do realise we are one of the last countries to have negative gearing. You do realise that it not only pushes up the price of housing while having an uncompetitive advantage over home buyers.

At the very least it should only be allowable on new housing. You do realise that we have one of the most over prices property markets in the world. And that owning a home is now a forlorn dream for most disapearing into the never never.

Maynard:

08 May 2014 9:39:26am

Also in the C21 we need to look at the long term costs of the Federation & the undemocratic Senate that entrenches bad behaviour. Are three levels of government still appropriate? Also the tax system needs an overhaul.Now Henry had a go at the tax system & little was implemented; Hockey has a review on the agenda.Tax is problematical since few of us really understand it, its equity & inefficiencies.But we do know that with public unfunded superannuation there is massive rorting. led by the politicians. This must stop.Concomitantly super profits taxes applied properly to all appropriate entities are equitable. And in this regard both bank and personal super income should have a super profits tax applied. These two would be efficient, equitable and easily sold to the public & implemented.

Alpo:

08 May 2014 9:42:02am

"In 2008 and 2009 Australia could afford a vigorous response to the global financial crisis precisely because it had so little government debt."... FALSE! The relatively low government debt had nothing to do with the response. The response was a political decision that Labor took on the basis of their priorities and their Keynesian approach to the economy, whereas a Neoliberal Coalition would have never taken such a decision - to the extent that Labor did - on the basis of their ideology.

If your house is on fire you use lots of water no matter what, and pay the increased water bill later with your work. You don't decide to save your house on the basis of whether you have or you don't have a debt on your water bills. If the latter is what a Neoliberal would do, then may a greater power save us all if the international economic situation worsens.

Brian Francis:

08 May 2014 11:47:31am

AlpoGood morning Alpo.With respect to your reference on ideology, it is quite correct that you point out the 'difference' between the two major Parties.I think there is a time for all of these differences to be incorporated into a strong foundation plan of a nations economy, but like anything, if it is overdone a problem develops. To a point each political Party carries with it the characteristics of the opposing ideology and it is the middle ground that is the 'safe house'. When critical situations develop, such as the GFC it is important to understand that the steps taken to allay the crisis,are temporary and need to be done away with sooner rather than later. It is also important to have a 'war chest' in reserve for just such situations. To that end each of the opposing parties have done their job. For now, if it be true that there is a looming crisis for the economy, then this Government will seek to stem that crisis by introducing measures they ideologically see fit. Your turn will come again and your beloved Labor Party will be able to take the steps they think are fair, but for now it is the turn of the LNP to get the economy into their ideological centre.

Alpo:

08 May 2014 12:28:32pm

"but for now it is the turn of the LNP to get the economy into their ideological centre."....

Hi Brian,Although some of us are hoping for a double dissolution and early elections, it is of course a fundamental prerogative of the elected Government to press ahead with whatever their plan is and try to negotiate the passage of their budget (and other bills) through the Senate. The final judgment will be made by the People on election day. However, all the way until then we are entitled to analyse, criticise, and argue. Nobody tried to silence the (extremely vocal) Coalition Opposition, nobody should try to silence the (hopefully equally vocal) ALP/Greens Opposition... I think it's called: Democracy.

Alpo:

08 May 2014 1:12:47pm

hidi,Not all political decisions are a result of panic. The alternative strategy for Rudd and Swan as the GFC was unfolding was to sit and wait, hoping that it was something transient, of little importance or that the "system" would return to its "previous equilibrium" by its own "internal mechanisms"..... Thankfully, they didn't go for that nonsense.I wouldn't call what Hockey is doing "panicking", to me it looks more like applying the recipes from the Neoliberal cookbook... let's hope that he doesn't burn the cake.

mortan:

08 May 2014 9:52:22am

Another budget prologue and when the anti climax that is the budget is finally delivered a predictable three months with every commentator on the ABC tearing it to bits will follow. And guess what there will still be two more budgets to attack before the next election. And we pay tax for this !!

Mike:

08 May 2014 10:00:06am

The IMF has warned that reducing spending is a great way to send your economy into recession. The Nobel Prize-winning economist Paul Krugman has warned that cutting public sector spending makes your economy worse. You only need to look at the northern hemisphere over the past 5 years to see this in action.

Of course it doesn't fit with neoconservative economic theory, which sees society purely as a market, so they pretend it didn't happen. They keep advocating the same thing - cut taxes and cut spending, because that's what conservatives want whether it's actually good for the country or not (it's not).

We should be cutting subsidies and tax breaks at the top end of town to increase revenue before cutting any spending on the most vulnerable people in our society.

TC:

08 May 2014 1:30:23pm

The reason the Northern hemisphere is in the poor shape it is in is because those countries have been spending more than they have been earning for decades, and when you do that, chickens will always come home to roost. The UK economy is making a stunning fightback, and their growth rate and unemployment levels are tipped to better ours this year, and they do not have our natural resources to fall back on. BTW, the UK didn't cut government spending but simply reduced the growth in the rate of government spending, big difference.

Reinhard:

08 May 2014 10:04:15am

Thanks John for bringing a modicum of sanity to the budget debate, however you should now prepare for the onslaught of character assassination and screams of "leftie bias!" for not joining the scare campaign and daring to provide an honest account.What the coalition don't want us to know is that the real issue has always been falling revenues, thanks to the GFC and the Howard Era tax cuts and $72b worth of profitable asset sell offs that gave Costello's budgets a short term sugar hit.You only have to look at how the revenue / GDP ratios fell from 25.7% in 2006 to a low of 21.6% in 2010 to see a pattern emerging.The coalition still have to sell their slash and burn agenda so they will keep the focus on spending while introducing their "special levy" tax, but you won't ever hear them admit that its real purpose is to help fill in that revenue hole.

clete:

08 May 2014 11:14:14am

"What the coalition don't want us to know is that the real issue has always been falling revenues,.."

That comment is almost laughable, Rheinhard. The Coalition railed against Rudd/Swan - Gillard/Swan throughout Labors term in power over just that issue. Placing too much emphasis on over-zealous revenue projections - and spending hugely against falling revenues.

Howards tax cuts, whilst overly generous, went back to us - the same people who paid them in the first place. Not to feel good, politically correct, non-productive wasted causes.

As for "Costello's $72b spend", it wasn't spent. We still have it. It went to the Future Fund, to help this country provision for it's massive public servant superannuation liability.

Reinhard:

08 May 2014 12:02:16pm

Abbott has never admitted the real reasons for falling revenue like the tax cuts, asset sales and the GFC, and the Howard govt only contributed $50b to the future Fund and left a paltry $20b surplus from the $72b asset sales and a $340b mining boom windfall.As for "feel good, politically correct, non-productive wasted causes" you must be referring to the restoration of public hospital funding that Abbott had slashed as Health Minister, when the fed's funding share dropped from 49% to 45%.

keith:

08 May 2014 10:04:37am

how could we make the likes of APPLE pay the right amount of tax , hears now we come down hard on the tax rules on them and they pack up there bat and ball and go home (that could be a good thing as there stuff is crap).same with a lot of the big over seas and some locale companies that take prided in getting out of paying there fair shear of tax. we need to change the tax laws and close up the loop holes cut corporate welfare to the bone and have a good look at politicians ENTITLEMENTS as they don't seam to be over for them...

cameco96:

08 May 2014 10:10:19am

Why does revenue need to be a percentage of GDP? What cost is there to government if the country simply produces more than it did for whatever reason? Perhaps if the rent seeking and middle class welfare were done away with we could have a more stable level of expenditure which would allow a proper assessment of what revenue the government actually needs as opposed to what it wants to allow itself (both parties) to bribe the electorate at the appropriate time. Politicians only have the power we invest in them and this hanging off everything the government may or may not do only perpetuates the feeding of these incredible egos.

Len Heggarty:

08 May 2014 10:21:18am

John,It is quite simple the answer to your question of how to reduce spending and increase revenue.The Abbott governmnt was given the answer on a plate.They must implement the 86 recommendations of the Commission of Audit.What was the Commision of Audit for?It was to mark a pathway to reduce spending and increase revenue.Will the Abbott government implement the 86 recommendation of the Commission of Audit? No.So just how are we to get back to Surplus?

Evan:

Cyn:

08 May 2014 10:31:10am

Honestly I agree with most of this article, but that doesn't change the broken promises Abbott made even though I knew they would be broken. With Labor at least you know why promises are being broken with the rapidly changing circumstances (GFC, and hung parliament) causing a genuine need to change priorities.

Yes the country need to get back to a balanced budget eventually, I happen to disagree with how the current government plans to go about it though. As you said were not in an emergency, so why not go for some modest tax hikes (spread out over several years done slowly to reduce the impact) and put firm limits on budget growth to a lower level than economic growth, simply by not allocating as much funds. This is a very slow way to reduce the budget and services are likely to suffer a bit, but there are no sudden shocks and it minimally hinders growth, but the current government looks like they think Australia is in similar circumstances to the PIIGS during the GFC and are acting accordingly.

Matthew James:

08 May 2014 10:52:53am

Not one word about Commonwealth Bank's record profit, 7Billion after tax, or Westpac's 3.8Billion after tax, or Macquarie Bank and Westpacs partnership with Global Health Insurers, Bupa who suck up 500MILLION of the 1.6Billion dollars the useless for profit private health insurers siphon off each year or all the hoards of investors businesses of all kinds number 1 duty is to serve before anything else. Not one word on the massively bloated and over rated financial services industry, true sacred cows in every way, economists from Commsec pointing the finger at the public service and anything outside their demands as bludging while getting sickenly richer off the sell off of public assets they despise. And your idea of cutting hard, selling off Telstra has turned out to be a total economic disaster (disaster capitalism maybe). You wont go anywhere near how the sell off was driven by banks and investors, sneering at anyone upposed to it, the complete rampant chaos of laying down any cabling infrastructure (NBN) has no forced the government into LEASING THE TUNNELS AND PIPING FROM SOME BUSINESS WHO NOW OWNS IT, 11BILL UP FRONT, 98BILL BY 2067 AND THAT IS JUST A LEASE. THE GOV USE TO OWN THAT!! A SENSIBLE ROLL OUT OF THE NBN TURNED INTO COMPLETE CHAOS AND THE WASTE OF BILLIONS, NOT TO MENTION THE PUSHING BACK THE ROLLOUT INTO A HYBRID CONVOLUTED MESS BY TEN YEARS. That's the austerity of the Howard Gov, plus laying the foundations for the private insurer driven destruction of Medicare happening right now, again so the massively over rated borderline criminal insurance industry (think QBE dumping Queesnland flood victims) can get absurdly rich doing nothing.

Clancy:

08 May 2014 10:57:38am

The cost of the superannuation tax break is already larger than that of aged pension and is growing much faster. We need to significanlty reduce this tax concession which is costing so much and favours the already well off.

ScottBE:

08 May 2014 11:02:16am

All the talk of cutting back on welfare with kids being terminated off Newstart if they can't find work after 12 months is a retrograde response to a perpetual problem and destructive to our social health as well as our economy. Do we really want people with no income support needing to steal to eat? This cannot be a good outcome for managing our national economy.

In the mid 2000s there was much talk of the structural deficit that had been created by Mr Howard's tax cuts. Mr Rudd furthered the reduction in income by raising the tax threshold. I believe the latter was a necessary and justified act to ensure greater currency without damaging the revenue too much.

It seems that to raise taxes on the wealthy is sensible. After all they're the ones who gained the greatest benefit from the Howard cuts. But listening to all the warnings gives me pause. As I wrote last night - "What sort of genius goes against such a long list of advisors to the contrary of such a budget debate. Some people are truly blessed with the fixed idea that they are the best judge of any given situation. Now I believe Mr Howard had this idea but he also had the great intelligence that so often shone as well as his erstwhile comrade (sorry all you Libs) in budgetary arms. I don't accept that either Mr Abbott nor Mr Hockey are in such a league."

Moreover the Budget Emergency is a concoction to generate anxiety (I noted last night the dramatic fall in Consumer Confidence since the election) pre-election. Our situation is not dire or in crisis. Yet structural reforms are necessary. But this should not, must not, disadvantage those who cannot legally survive without supports.

Lets relax an little, get the whine out of Mr Hockey's ejaculations of an Emergency and have a real good hard look at Ken Henry's report again. Extreme actions are suited to extreme times. These times are not extreme. Lets do this right instead of being hastened by extremists.

GC:

08 May 2014 11:09:14am

Measuring Debt vs GDP is stupid, unless you want to sell the Australian Economy. Fed Govt debt is over $400 Bill caused by Wayne Swan, the ALP and the Greens!Federal tax debits are over $400 Billion versus GDP of some $1400 Bill. So debt is 100% of Federal tax debits. Saying it is 15% of GDP, and therefore affordable, is nieve in the extreme. That ignores, corporate debt of $600 Bill, mortgage debt over $1000 Bill and Student and Credit card debt of over $100 Bill.

If you add the GST, State and Local Council Taxes the total tax take out of the economy will be closer to $700 Billion or 50%. That leaves people and business $700 Billion to try and pay off costs of survival as well as the $1700 Billion in debt as well as the interest of $85 Billion.

This is why economists and federal governments don't live in the real world. It's about time they did. Cut Federal Spending by 25% and pay down the debt over 4 years.

Alpo:

08 May 2014 1:26:01pm

"Cut Federal Spending by 25% and pay down the debt over 4 years."... Which means taking about $94 billion off the economy each year (a contraction of 6.3% p.a.).... and produce millions of unemployed people, homeless people, unbearable pressure on the social frame of this country, skyrocketing crime, including serious crime, drug use out of total desperation.... GC, do you think you will find a place to hide in that nightmare of a country?.... In any event, even if this Government is mad enough to follow such a bankrupt advise, you do realise that the plan won't have a life of 4 years do you?

family man:

08 May 2014 11:14:16am

To 'end the rorts'I am confused by your, and others, assumptions that anyone with an investment property is a "high income earner" who thinks he is "sacrosanct from paying taxes".The system is not perfect, I agree, but at this current time it is the system in place and as such I have invested in an investment property to benefit my son and family in the future.I wish to mention that I am neither a high income earner nor a speculator, merely someone trying his best to provide a future for his family. I struggle with the arrangements, earning around $60000 as a combined family income. I realise this wage is relatively good and in no way makes me poor or needy, it does not, however, make me a high income earner or indeed a "gambler".In the future, if the system were to change, I would do my best to provide using the new set of regulations.I simply ask that you do not stereotype all those attempting to provide for families in such a negative mannerMany thanks

end the rorts:

08 May 2014 4:31:41pm

Hi family man, yes my statement was generalised and I understand that many 'investors' are just trying to make the best of the system. You didn't make the system (unless you work for the Board of Taxation or Treasury or ATO) and my intention is not to attack you or any investor for the matter. The system stinks and it needs to be changed.The genesis of negative gearing is so strange it reads like science fiction. A property can pass through a succession of investor hands and still be negatively gearing next century - there are no limits to how long it can be claimed on a particular property. No limit to the number of properties and individual can claim against.If negative gearing where allowed to be claimed against new property (or new IPO share issue) and only for say 4 years then that would be a start.In many countries, including recently China, Taiwan, Singapore & Hong Kong, govts have taken measures to rein in property speculation.In Aus, too hard basket - distort the tax system and virtually force parents to bolster the National debt levels by helping increase mortgage amounts.Seems many, if not all, pollies have investment properties and would rather look after the banks rather than the community at large.

Rick:

08 May 2014 11:22:48am

'Plausible changes to superannuation could yield 9 billion a year'. Kidding, right? At a cost of $40 billion a year changes to superannuation tax concessions could yield a hell of a lot more than that. I guess the test is in the idea of 'plausible'. Superannuation tax concessions are now costing almost as much as the aged pension, something I wouldn't want to try and live on, but there is a suggestion that the manner of indexation will change to make it less costly. When the majority of the superannuation concessions go to the more well off reducing the pension in any way is shameful.

aGuy:

08 May 2014 2:25:36pm

What a magical number. 20%

Why not 19% or 21%

I am far from a fan of the public service (especially federal), yet I know if that the government had to manage on 20% of income from all of society that there would be sever cut backs. Chances are they wont be in the areas you would like.

John51:

08 May 2014 3:23:10pm

That argument demonstrates a total lack of understanding of not only how government operates. It also demonstrates a complete failure of understanding of the relationship of government and the private sector in the economy.

Do you really think the private sector is going to replace the money you pull out of the private sector when you shrink the economy? There is no example any where in the world where that has happened. If you shrink the size of government and the role it provides in the funding and provision of infrastructure and services. What you find is you shrink the economy itself.

You not only shrink the economy you reduce its competitiveness as well as productivity as well. It is though people think Australia has been as it is now from the dawn of time. When I was born at the beginning of the 1950's there was no national highway.

At the beginning of the 1950's there was no national electricity grid or national telephone grid. In fact telephones were a rarity than the norm. There were not even sewage systems, or water to every home. Many homes including in Brisbane had their sewage tin collected from their outside dunny down the back.

All of this infrastructure as we know it now has been build over the past hundred years, most it in the past 50 to 60 years. The services that support us in our every day lives including our businesses is crucial to our modern economy. You take them out of the system and the whole complex economy will struggle as we will.

Plus the simple fact is all of that government money except for what is spent overseas on armaments and new untested aircraft goes straight back into the economy. Pretty well every dollar that goes to pensions straight goes back into supporting jobs in the economy. You reduce that it comes out of the businesses where they spend it.

mahaish:

09 May 2014 9:09:10am

well said john51,

when you listen to mathius korman and joe hockey, it is very clear they believe in crowding out as a valid economic theory. they clearly dont understand how the banking system operates, and they and their advisers believe what they have read in their economic text books.

what comes first , a deposit or a loan. i know what the answer is, but i wonder if hockeys advisers do.

the only way you can get away with shrinking the government financial balance in the banking system, which is what heading towards a budget surplus entails, is for the private banking system to expand its balance sheet and create more credit growth .

given the current state of affairs in private sector balance sheets, that is a very short run scenario before we hit a brick wall for the private sector.

the central bank can play its roll and reduce the target interest rate, but within 3 years by my calculations, we are at a tipping point, where interest rates are at well below current levels, and credit growth has stalled.

here is a prediction, if the government emabrks on its current financial tragectory, we will have the target interest rate at close to 1% , and be facing a recession by 2017/18.

John51:

This lot live in some neo-liberal economic delusion acting as though it is reality. If a business, or an individual acted on their ideology of no debt the economy would come to a complete halt.

A business invests in itself for future growth. Individuals invest in homes, if they can afford to these days with the overinflated home prices. And government invest in their own nation. Well, we hope so anyway. Though going by some of these trade agreements they sign I am no so sure of that.

Government works with the private sector in supporting the economy and people in a whole range of complex measures of services and infrastructure. We are after all in a very complex world operating at a global level. We hope governments don't sit on the sideline and do nothing simply leaving it to the private sector because we know where that will take us. And it is not anywhere good from experience around the world.

whatif:

08 May 2014 11:38:20am

nothing will be safe from the abbott government, hockey will seize any money he can and as they drift further into debt will call on every one to believe it was all labors fault, don't worry about your super, it will be under attack also, and I thought this was saving for retirement, hahahahah people will need to have deep pockets to survive,

mybias:

08 May 2014 11:56:56am

Dear All

The debate for me is really confusing, it is simplistic to think that the deficit is a problem. If we look to our friends and allies I believe hat US Govt debt has increased by 1.7 trillion dollars this year to 16 Trillion. Larger than the Australian economy each year.Additionally the FED Reserve Debt has increases by a similar amount. The FED carries an estimated debt of 30 trillion.

Similar stories can be found in other G7 countries.

Nobody expects the US to pay back there debt.

The budget talk so far has been about reducing taxes on foreign entities and increasing tax on Australians.Even more peculiar some of the large mining companies has significant holdings by state owned corporations and are already in partnership in the leases with these foreign govt this doesn't make sense to me.

For me our current account deficit is alarming so we need to build a large capital base by both private and govt.

I can agree with TA about many of the initiative but when looked as a priority they are generally low and have some downside.

My recommendations would be

1) Increase tariffs on all imported goods and services (no exemptions), ie use tariffs as a revenue stream but this does have other benefits to the local economy2) 0.5% Tax on all overseas money transfers3) Fix the mining tax to include all commodities.4) Encourage Australian companies we need to stop being a branch economy.5) No more foreign takeovers (especially by state controlled entities.

mahaish:

"Additionally the FED Reserve Debt has increases by a similar amount. The FED carries an estimated debt of 30 trillion"

i think the US treasury hs over 40 trillion in oustanding liabilities.

"Nobody expects the US to pay back there debt."

the fed rolls over 10's of billions of dollars worth of treasury debt every month. there is no default risk

"For me our current account deficit is alarming so we need to build a large capital base by both private and govt"

the current account deficit is also the capital account surplus. it was thought a rising current account was a problem, but it actually reflects the desire of the rest of the world to hold oz dollar denominated assetts. a bigger problem would be a shrinking current account, that would indicate capital flight.

for instance if you look at the fed data for the united states, just about every recession or near recession has been proceeded by a shrinking in the trade deficit. this has the effect of shrinking the deposit base of the US banking system, and there are flow on balance sheet effects, that lead to balance sheet recessions.

Dozer:

08 May 2014 12:00:06pm

In my view many people are missing the point re this Debt Levy.

The LNP knew the state of the Budget before the election. They were constantly telling the public that there was a Budget emergency. Still, they refused to pass certain measures proposed by Labor and also committed to no new or increase in taxes (other than PPL levy). The LNP told us they could address the deficit by reducing the wasteful spending.

Now that they are in government, increases in tax at the top end is no longer class warfare but everyone playing their part. This is not only an outright broken promise/lie but a lazy way to address the Budget problems. It is very easy to increase revenue by increasing taxes. It is much harder to reduce spending and ensure money is only spent where it is needed. We still need to see the Budget next week but there are so many better options to increase revenue rather than slap a temporary lazy and inefficient tax at the top end eg

- address super concessions- address tax on super earnings greater than $100,000 per year (to me this is a no brainer)- address FBT concession on motor vehicles not used for business use (once again a non brainer unless you work for a leasing company)- improve the Mining tax instead of scrapping it. Even the miners were saying during the initial debate that they accepted the current system was not the best- plug the loop holes re Trusts to reduce income splitting

And one from left field.

Asset rich (eg home), income poor retirees should be able to draw on a pension. We should not force people to sell their homes in order to survive. However, once they pass what happens to this valuable asset - it is inherited by the retirees family. My view is that when a retiree passes, a portion should be 'repaid' to the government. I am not talking about death duties or inheritance tax as if you do not draw a pension or use the Hospital system (because you have private cover) your estate should not be taxed. Only those who needed support in their later years should then pay it back with the proceeds from their estate instead of taxpayers funding it and then their family getting the inheritance.

Many things the government can do to improve the equity of the system and make long term changes - instead they break promises and opt for the lazy way.

Jatz:

08 May 2014 12:02:08pm

The case for reducing concessions whether it be negative gearing or superannuation, and tightening eligibility for handouts is much more compelling than temporary levies or tax rises. The government should not be delaying the change in compulsory super contributions to 12%. The next round of payrises should go straight to super and not to the pay packet, so that companies can keeps costs in check. That also helps to spread the burden and plans for the future.

Geronimo:

Sinekal:

08 May 2014 1:21:36pm

No problem,

Instead of hundreds of millions of dollars spent keeping refugees out, sell them entry for $10,000 or so.. no more than they have been paying to others offshore to get smuggled in. Our Govt saves many millions and of course gains revenue in the process. No dole, no free medical, no gratuitous handouts and pay no personal tax for (say) two years. Let them work for their place in society.

What ? The bleeding hearts don't approve of this idea ? Wow.. That's a surprise. Then buying their way in is only okay if done by bribe and deception offshore?

Alternatively, give them 20 hectares each, unlimited water and a converted sea container to live in at the Ord River. In twenty years they will be rich farmers while the parasites are still bleeding us dry.

a:

08 May 2014 2:09:38pm

yep its been done the're called migrants. Howard said they could all come here if they got enough money, but we'll send you back if you don't. Howard also said come here and fill our uni places, we've got to many australian doctors and need to train foreign doctors. Now Pyne says we don't need australians to go to uni, all uni places are available to the highest bidder no matter where you live or pay tax.

Michael:

08 May 2014 1:28:05pm

1. Start at the top.The essence of leadership is to communicate and live the compelling vision. If we need to tighten up our spending then the example starts at the top with the obscene salaries and perks of our politicians (And the sheer number of them) A start would be:a. Pay MP?s the mean wage. ( I would prefer 90% of the award wage for social workers since they are not qualified)b. Pay ministers on a performance bonus against defined and audited relevant KPI?sc. Apply the same principles to parliamentary pensions as the rest of us i.e 9% of salary accessible at 60 or whatever age is set for the rest of the population. Paid on the same basis as ours.d. Abolish all other benefits other than travel between parliament and their electorate for individuals not spouses and families- no more study trips of the wine industry or French restaurant operations.Whilst this would not make much difference to any deficit it would send a signal and provide concrete evidence to a sceptical public. Allegedly it would reduce the inflow of prospective politicians, according to the economic theorists. So lets cut the demand by being efficient.

The current federal arrangement of 7 Quasi independent states and a government with joint responsibilities is highly inefficient in a country as large and sparsely populated as Australia. It also leads to a ridiculously high ratio of paid (and generously so) politicians to overall population. The cost of retaining each as a separate sovereign government is also very costly.The division in responsibility in major expenditure areas of Health and Education leads to major inefficiencies and accountability issuesThe commission of audit proposals exacerbate this situation. Australians by and large expect the same standards and policies to apply wherever they live. The current states whilst important historically and symbolically they do not represent a widespread ?Commonality of Interest? the idea that residents of Dubbo or Orange have a greater commonality of interest with those of Inner city Sydney than Toowoomba or Charleville other than at State of Origin or the Sheffield Shield is ludicrous. A far greater benefit would be obtained by replacing state governments with a series or regional councils, operating with areas of common interest in the delivery of services such as Health Education and Law Enforcement and Emergency Service.

That would reduce the number required by about 80% and greatly improve the efficiency of government

Cherna:

08 May 2014 1:31:58pm

There is no emergency you say John, yet the IMF, Global Rankings and MYEFO have provided some numbers that are of concern enough to make one wonder if indeed we may/are at emergency levels on all counters. Let's quote a FEW and see:

Based on the above without corrective action our debt will escalate to a projected $667B by 2013.

Labor blame falling revenue for their woes. Reality shows revenue rose by $70B during their tenure. The problem was they spent close to double the revenue at $137 B. In the case of the MRRT Labor spent projected tax revenue that NEVER eventuated - height if irresponsibility.

Spending as a percentage of GDP increased under Labor from 23.1% to 25.9% - small change but the translated dollar value has the IMP putting Australia at the TOP of the list of 17 advanced nations in terms of spending growth. Some record to be proud of? NOT!

Unemployment, contrary to Labor apologists, actually rose under Labor to levels unheard of during Howard's tenure.

The effects of a mismanaged economy under Labor reflect in some unpalatable nasties such as taxing rate as % of profits increasing from 83rd to 109th under Labor; pay and productivity from 40th to 113th (source Global Rankings).

How can one forget the fiasco of the MRRT and the Carbon Tax - each of which delivered only sufficient tax to cover admin costs, if that. Who ever heard of a tax that provided no cash into consolidated revenue?

MYEFO calculated that $12B is wasted in servicing Labor debt - that money down the drain which could have been used to pay for NDIS in FULL, Gonski in Full, Dental reforms in FULL, Health Reforms in FULL. with money left over for infrastructure... within ONE term and not as Labor has on the never-never simply because they squandered the money

Then there was increases in red tape with an associated 20,000 new public servants, increased cost of living, all those new taxes (the world biggest carbon tax), breaching one debt ceiling after another, spending tax revenue before collecting the revenue with in the case of the MRRT derived no revue, and so on.

There may not be an emergency, but if not, we are but a whisker away from one; thanks Labor for nothing!

debt tango:

08 May 2014 4:49:16pm

Yes many agreements Cherna.One point to remember:The main purpose of getting into a massive Federal debt tangle is so that when there is a subsequent "emergency" (eg GFC MkII) a call for 'forced asset sales' is heeded. Sitting pollies do not understand this, they appear to be merely puppets in the play, marching to their silly fates.It is called crony capitalism, and all one needs is creative financial architects with sleight of hand & gift of the financial gab and trusting elected incumbents oblivious of what is really happening.

paul:

08 May 2014 1:41:20pm

People ask where the mining profits went , well plus of 85% of all mining wealth went overseas, it did not stay here, likewise with all Auto makers profits, same as most Food items mostly foreign owned, same as cosmetics, likewise for electronics, all of Australia's defence dollars ends up in foreign lands, we all have mobile phones all foreign made, our clothes foreign made, foreign owned, even the toothpaste we use in morning foreign owned, we eat 90% of foreign owned companies foods, we drink water owned by a foreign entity.... our two biggest dept stores are now foreign owned, our oil refineries are foreign owned, until this changes all the monies end up overseas..... and that is Australia's number one issue "foreign ownership" and not one person in this country does anything about it from the PM down.... Our richest man spends his wealth creating casinos to add misery into peoples lives, our richest woman brings people here on 457 visas to work at Roy Hill iron ore mine, and her major backers are foreign bankers and investors so more monies overseas... What Australia needs is another 100 plus million people into it then we can be an economy onto ourselves like the NAFTA and EU trading blocks... 23 million people isn't large enough for any true investment anywhere in this land.... We can not rely upon a one trick pony like china, as what happens when they say enough iron ore, coal, etc etc... then what is the future for Australia and the next generations of Australians... ..

Cherna:

08 May 2014 4:44:41pm

What we'll do is borrow some more money to get us through ALL the bad times. Haven't you heard we do not have a debt crisis, and debt is good, we need to lower revenue - its good to increase spending, the rich can give up their cash and distribute the poor, large companies can be nationalised (especially the banks), private property will confiscated to be redistributed amongst the poor ... and if you don't like it off the the goolag with you.

Steve F:

08 May 2014 1:47:13pm

The talk of more tax (particularly on high income earners) has just validated my recent action in visiting my Accountant to talk through tax minimisation strategies. In short, I earn in excess of $120k a year (and deserve every cent) and to be frank, have become annoyed at continually being taxed or levied for one reason or another - generally due to incompetencies of labor governments. Also, putting aside the fact that our present tax system is fundamentally flawed on so many levels, my Accountant has advised of several strategies I can implement to easily save me $12k - $14k a year. To be honest, I am now doing this out of spite and feel a great sense of satisfaction that the Government will now not get the benefit of these funds and I can apply these savings to ther betterment of myself and my family.

D.Williams:

08 May 2014 2:10:54pm

Caveat: I'm a loony lefty.

What I like about this article is that it undermines the contentions by trolls on both sides of the political divide i.e. that the state of the Australian budget is all down to one party. Both sides target revenue spending to their favoured areas and both sides contest every single savings measure and decry it as class warfare.

As a lefty I prefer spending to be made on health, education, infrastructure, the arts, and welfare for the most vulnerable amongst us. But I will concede that those on higher incomes (who don't loop-the-loophole in the tax code) do pay their fair share generally and it is too easy just to say they need to keep getting taxed more.

It seems raising the pension age (and super withdrawal age) is necessary evil. It also seems clear that we need to close the generous superannuation tax concessions for the wealthy, phase out negative gearing, phase in a higher GST (with attendant means-tested help for the less well off) and possibly start increasing the contribution students should make towards their tertiary education in their accumulated HECS/HELP debt.

It also seems crazy that Abbott - and here I get my lefty hat on - is crazy to keep in place all the spending related to the carbon tax once the carbon tax has been removed (as idiotic as I think it is to remove carbon pricing that is one of the main reasons Abbott is in power).

I fundamentally disagree with the Coalition and I think that going after the carbon price was pure politics over good economic and environmental policy (though I will add that I wasn't sold on the fixed price Labor and the Greens and the Independents came up with considering carbon prices in all other markets were drastically lower) but pricing carbon at least puts a cost on a contributing factor towards global warming which should drive industrial efficiencies.

Benice:

08 May 2014 2:23:32pm

Cuts to govt expenditure look eminently sensible and reasonable when you just talk about them as line items in a budget saving X amount of dollars. But ignoring the social cost and effect of such cuts by being purely clinical in your language doesn't mean people don't bleed.

For example, you say including a pensioner's place of residence in assessing eligibility will save $7 billion a year. Impressive, until you consider the social costs:

1) Elderly people forced to relocate away from family, friends, communities just because property speculators have forced up prices in their neighbourhood

2) Some communities will lose the many benefits of having elderly people in their neighbourhood because the're forced to sell up.

3) Entrenched poverty in lower and middle class families. People who worked hard all their lives to pay off a house so that their kids and grandkids would start out from a better financial position than they did will now leave their families no better or possibly worse off.

This has all kinds of implications for future money available for investment in growth, social problems, educational outcomes, etc. It also increases and entrenches the gap between rich and poor.

There are revenue measures which can be taken in tje short term to ensure pensions do not overstrain the budget as well as super tax concession changes as outlined above. In the long term, the increase to compulsory super to 12% or 13%, as well as the advent of generations who have had compulsory super all thwir lives will relieve the pension burden.

Also, those who take early retirement NOT for health reasons could be prevented from running down super and going on the pension by having to wait a set period of time based on their super and how eay they retired befire they can claim a pension or part thereof.

I have no problem with the govt going after people who seek to hide liquid assets in the bicks and mortar of their primary residence, but this can usually be done by following the paper trail. There's no need to swallow up all pensioners who have homes over a certain value in order to prevent pensions being paid to the handful of real millionaires.

Teresa Henshaw:

08 May 2014 2:42:23pm

It amazes me that the government, whichever party they are, come up with a budget every year and spruik about what causes them to have to spend more money - so they have to tax us more and put more people below the poverty line.

But, I think it is time the Australian public were given a full annual accounting of every dollar our parliamentarians spend (of taxpayers money). They should be able to afford newspaper space to publicise this accounting statement in full.

Also, since Joe Hockey is so keen on saying it is time to stop the 'entitlement' mindset of the public - how about the politicians themselves (their pay rise will come soon enough, it always does).

We, the public, should be able to demand that we stop funding the lifestyles of former prime ministers for a start. No one else who works is provided with lifetime travel, provision of an office, telephone expenses etc. after they retire - all these 'luxuries' must be paid for from our own meagre superannuation, if we are able. Politicians get a phenomenal wage and still are spoonfed their lerks and perks via the public purse. This will be where the big-bucks are wasted.

jeorg wmd busche:

John51:

08 May 2014 3:49:07pm

John, it would be nice if there was some honesty in this debate over the debt level. The 300 billion that has been borrowed did one thing, it kept the economy growing. It pumped 300 billion into the economy through government that would not otherwise have been there.

But it did much more than that because that 300 billion also drew a lot of other private investment into the economy that would not have otherwise come into the economy. Money is attracted to invest in growing economies. It stays away from depressed economies.

In a depressed economy both individuals as well as businesses tend to pull back from spending. And in the case of business they not only stop investing they tend to also start laying off workers as well. All of this creates a cyclical downturn and lack of confidence until either the global economy picks up or governments start stimulating their own economies.

People may think the global economy is over the GFC but any growth around the world is slow and hesitant. Even China who has helped to drive investment her within the mining economy is taking two steps forward and one back in uncertainty.

Yes we are carrying more debt than before the GFC. But we are also still growing faster than most equivalent economies. And we still have relatively low unemployment to most equivalent economies. And what debt we have is low considering most equivalent economies.

As for interest rates going up greatly on our government debt I can?t see it anytime soon. The global economy would have to well and truly get over the GFC before that happened. And if global interest rates suddenly went up all it would do is throw the world back into a downturn because of the level of debt in the United States, Britain and Europe.

Skeptic:

08 May 2014 4:57:53pm

If the salary packages of our "best and brightest" in Canberra were to be included on the list of budget slash and burn, then I might agree with the author. But we all know this is never going to happen. One rule for the born to rules, budget pain for the rest of us.

yourvoice:

08 May 2014 5:08:06pm

How about looking at debt this way. Our economies run very much like the game of monopoly. Except WE borrow at the beginning and pay interest every time we go past go. We do earn income from other players in this economy but it depends on how much money is left in the game. This money continues to dwindle every time we pass go unless further borrowing is made. If we only paid just the interest of 10 precent, how many more times can we go round the board before all trade stops?

Do you get the picture. The world can never pay this debt back with out reducing the money supply needed to maintain commerce. Under the present monetary system we have got to increase borrowing at an ever increasing rate or face recessions or depressions. Obviously we need to change this system, until we do this its all band aid stuff. We are bleeding to death and in the process real our wealth is stolen in front of our eyes and we are blind to it. Monetary reform needed!

Nobody:

08 May 2014 5:23:04pm

Concentrating on tax revenue and govt spending misses the need for the structural change that Australia's economy desperately requires. To pursue the exercise and obesity analogy, I suggest a lot more physical exercise and substantially less processed fats and sugars in the services sector, and high protein for production-based industries. A bloated financial services and retirement industry gives the false impression of good health but conceals an underlying and severe chronic atherosclerosis in productive output and diversity, and ultimately ties up AUD5 trillion in overpriced property that produces nothing. Unless the patient changes this lifestyle, the prognosis is poor: complications in the microvasculature, diseased vital organs, potential loss of digits and limbs, and expensive treatments to address the symptoms as they arise i.e. chronic illness requiring ongoing therapy.

harry:

08 May 2014 6:17:46pm

The best way to increase government income is to make Australia more attractive to run a small to medium size companies. But what is happen here is completely the opposite. Commercial rents are some of the highest in the world. The Dollar is about 15 cents higher than it should be. Basic workforce is hard to get because they have to pay astronomical rents as well. Manufacturing in Australia is dead. Most companies are just import export joints, making themselves look like they producing something. It does not look like the Abbott government have any plans to change this.

Treetop:

08 May 2014 7:34:31pm

When Australia had a large selection of manufacturing industries and local retail stores were owned locally it helped to stimulate the economy because when local businesses spend locally , the flow-on-effect brings excellent results to the Australian economy .Today a large portion of retail stores are owned by multi-national interests so a lot of the profits leave Australia and if you go to any large shopping complex anywhere in Australia , you often find the same mix of shops so that shopping in Australia has become more homogenous .What has happened to many of the locally owned cake and bread shops or the old fashion style fish and chip businesses that sold fresh Australian fish and cut their own fresh chips and sold freshly made hamburgers or pizza shops that made their bases fresh and roll it while you watched and only used fresh ingredients , today many pizza shops use processed ingredients straight out of the deep freezeI recently ordered a coffee and muffin from a multi-national fast food store , the muffin has not fresh , it has hard as a rock , the store assistant said ,'' we do have others in the freezer and I can defrosted it in the micro-wave ''You would think that a muffin would be freshly made and not out of the deep freeze . A large supermarket chain was in the news recently caught selling frozen bread from Ireland and sold as freshly baked in Australia .

harry:

08 May 2014 6:31:53pm

The profit of the mining boom is in the pocket of few stacked in low tax trusts. Just ask Gina how she does it. Money can afford to protect low tax structures by lawyers. Like the $882 million Hockey agreed to pay to Murdoch for paper loans losses created in a tax haven , not even in Australia. What a joke that was.If one believes they can stop Apple or Google to move revenues , good luck.

mahaish:

08 May 2014 9:06:51pm

"Many on the left are uneasy at calls to balance budgets. It is true that in the short-run, tightening budgets can increase unemployment. But the alternative is worse. If governments run continued deficits, and see their debt increase, eventually they will be forced to cut much harder. "

again another throw away comment,

how about someone defending this proposition, so the rest of us can examine how credible the defence is

how about the author actually explain what the long run consequences are of a rising public debt . give me a chance to try my luck and blow it out of the water

bob g:

08 May 2014 9:25:04pm

We are acting like children shaking boxes under the Xmas Tree before Xmas Day.Why don't we wait for the Budget to be delivered? Why do the Labor Party act like they are now the budget experts and "oh so visionary" pending next weeks budget? Great pity they did not have the ability of vision way before the last elections.Where were you Australia when Labor blew big holes in our bank balance? Those holes will not go away on their own and if Labor was still at the helm we would be "Auction fodder" for the highest bidder very soon.

ed:

09 May 2014 8:16:36am

Labor & Libs, what a choice.You are right about Labor's debt embrace - a lazy non-solution.Disagree the outcome is going to any different with Libs at helm.Forced asset sales are on the horizon.It is called disaster or crony capitalism.The Laberal Party are past masters at it.Sorry future generations - they know not what they do.

John Smith:

09 May 2014 9:49:16am

The clear solution to fix our finances is: Reduce and simplify our tax system.1) Abolish Income Tax (individual and company)2) Abolish all other minor taxes (stamp duty, payroll, etc.)3) Keep the current GST 4) Establish an annual 4% tax on any property (residential or commercial) with no concessions (charities, family home, etc Everyone will have to pay). This will raise an estimate of $280 billion per annum.5) Establish an annual 2% (charged daily) on any balance held at any financial institution (no concessions and including Super Balances)6) Maintain current excise tax on petrol (indexed to 30% of price), tobacco and alcohol7) Do not allow any new DIY Super.8) Equalise the pension age with the access to Super.9) Make it compulsory to convert the Super balance at tthe tiome of retirement into a Retirement Annuity (until you die type). This Annuity will not be subject to the 2% Tax. Make it optional if the result is an Annuity with annual payments larger than the age pension10) Age pension paid to complement the Retirement Annuity, but taking into consideration all assets (including family home) above say $500,000.

The abolition of Income Tax will work to offset any political difficulties with the creation of a Property Tax. All these non-sense of salary packaging, negative gearing, super contributions would be eliminated as there will be no Income Tax.

Harquebus:

09 May 2014 2:14:02pm

1: Forget economics. It is "fatally" flawed. It has polluted the planet, poisoned us all, does not factor physics or the environment and is what has got us into this mess in the first place.2: Implement national and encourage international population reduction strategies. One way or another, nature will drag us back to sustainable levels and it won't be pretty.3: Properly manage our finite resources which, are currently being pillaged.4: Reduce consumption using quotas and not with unfair taxation. We can not shop our way to sustainability.5: Plant lots and lots of trees. Massive scale reforestation will help the climate, rainfall and be a valuable renewable resource for future generations.

Advocate:

09 May 2014 10:32:31am

As long as everyone is scared and broke, The Liberals and the powerful rich can do whatever they want, break the people , disempower them and keep them as slave labor, its working for them, why should they change a thing except to ramp it up more, which they are doing, oh and by the way can some bright spark actuary write an article about the fact that those on welfare and family tax A And B are in fact the ones who keep the cash economy going, the majority of tax benefits and GST paid by all goes right back to the Government, just look at petrol tax?

Tell the truth, its time to set the record straight and give truth a voice, not the shameless lying Abbott cult following who only want favours for funds, he has you all by the balls and you won't dare rock the boat? Talk about bribery and corruption at the highest level, its embedded in the system!!

seanofinn:

09 May 2014 10:41:10am

John Daley you are right on most points, which is more than can be said for the IPA, but you have only touched on the real issue here. We have a revenue problem pure and simple we are the third lowest in terms of total taxes collected in the OECD and we are number 1 in terms of revenue forgone in handouts to the vested interests $120 billion if my memory serves me. Who are these vested interests. One of the big ones the tax concessions to the wealthy to put their investments into superannuation, lost revenue $30 billion, Negative Gearing $5 billion, Diesel Fuel rebates, claimed by miners if removed to be higher than Mining Tax paid after their redesign, so likely $10 billion, to name just a few. Then of course why the 50% discount on capital gains? What makes them different from earned income.

David Arthur:

09 May 2014 12:32:11pm

Dear Dr Daley,

1. Charge a Turnover Tax on all companies set at a rate equal to total unemployment benefits, in return for which you give them a decrease in Company Tax. As well as taking unemployment out of being a cost item against General Revenue, this will incentivise companies to create jobs so as to decrease their Turnover Tax.

2. Set a qualification-dependent Payroll Tax at a rate equal to total post-secondary education and training expenditure, in return for which you give them a decrease in Company Tax. NB this includes any qualifications obtained overseas. As well as taking education and training out of being a cost item against General Revenue, this will incentivise companies to look for skilled labour in Australia, rather than get 457 visa workers.

3. Legalise and put a consumption tax on marijuana which goes straight to the public health sector. Do the same for alcohol and tobacco. This way, cannabis, tobacco and alcohol users fund any health care they might need - it also takes big chunks of the public health system out of being a cost item on General Revenue, and in the case of cannabis decreases State law enforcement expenditure. Win-win.

4. Replace the MRRT with a Raw Material Export Tax, which you pay if you export raw material (eg iron ore, or wood chips) instead of a processed commodity (eg iron and steel, paper). This encourages Australian processing of Australian raw materials before export from Australia, thus growing the economy, and getting people off the dole into jobs.

5. Institute a fossil fuel GST surcharge (or a separate Fossil Fuel Consumption Tax, FFCT, on the carbon content of coal, petroleum and gas, which you use to further decrease other taxes (not the taxes outlined above). Before you know it, there'll be Australian biofuels production to replace imported petroleum, and Australian manufactured goods will be competitive once more because goods imported from China will have to pay FFCT on the fuel used to ship them from China.

6. Raise the GST rate for sugar that is added to processed food which goes straight to the public health sector for treating diabetes and obesity. This way, junk food consumers fund any health care they might need - the price signal might even encourage them to seek healthier choices, and will also encourage food processors to review their formulations. It also takes big chunks of the public health system out of being a cost item on General Revenue. Win-win.

That's a start, Dr Daley. Feel free to get back to me if you need any clarification. Other people who know more about the issue than myself argue for changes to Capital Gains Taxation. You'll need to talk to them about that.